The Barbados Manufacturers’ Association (BMA) is warning consumers not to expect a dramatic fall in prices as a result of the removal of the National Social Responsibility Levy (NSRL).
The abolition of the hated tax took effect on July 1 as part of a wider economic recovery plan outlined by Prime Minister and Minister of Finance Mia Mottley in her June 11 mini Budget presentation.
BMA Executive Director Shardae Boyce said the removal of the tax would affect companies differently, therefore consumers should act in a “level-headed” way as they expect a drop in prices.
“The Barbados Manufacturers’ Association . . . urges consumers to have a level-headed reflection on budgetary measures and set price expectations based on what drives costs,” Boyce said.
“The association is cognizant Government’s only intention is to rebuild the country, however the presumption that there will be a sharp decline in prices must be debunked. A ‘one size fit all’ prediction in the drop of prices should not be used given that various factors are impacting cost, from business to business,” she added.
The levy, introduced in September, 2016 at two per cent, and raised to ten per cent last year, was charged on the price of the imported goods at the port of entry and on the production cost for local manufacturers.
Boyce explained that production costs for local manufacturers included the sum of money spent to manufacture goods, including expenses such as water, labour, fuel, raw material costs and general overhead.
As such, she warned that the removal of the NSRL did not necessarily mean a reduction in production costs.
“Production costs vary from company to company [so] it is difficult to predict ‘blanket drops in prices’. For example, raw materials are influenced by oil prices, which are increasing. Any increases in freight also escalate production costs and additional payroll costs from NIS [National Insurance Scheme] increases will have an impact. All of these factors will influence the final price of a product,” she explained.
“More importantly, the Barbados Manufacturers’ Association is calling on each Barbadian and friends of the country to support local producers and service providers as they navigate the challenges ahead,” she added.
The Barbados Chamber of Commerce and Industry (BCCI) and the Small Business Association have indicated that consumers should expect some price reduction in some products in two to five months after the removal of the tax depending on a range of factors, including the amount of stock the companies had that attracted the controversial tax.
However, in a statement today, the BCCI said after meeting with members on Monday, a day after the removal of the tax, the membership acknowledged that the removal of the NSRL would have different implications for the various sectors that were affected.
The BCCI also reminded consumers that products that did not attract the tax would not see a price reduction as a result of its removal.
“The BCCI members were of the view that the removal of the NSRL had to be contextualized in an environment whereby other operational costs such as shipping, fuel, supplier and other input costs may result in price movements that may impact the final cost of the goods after the removal of the Levy,” the BCCI said, adding that the manufacturing sector expected that any potential reduction in prices attributed to the NSRL would be “tempered” as a result of the Garbage and Sewage Contribution fee and 1.5 per cent employer Health Service Contribution through the National Insurance Scheme.
However, the BCCI gave the assurance that the public should expect “relief” as the NSRL is removed wherever it was applied.
“While determining that robust competition within the market would ensure that prices are kept at fair values, the participants cautioned that the impact of the removal of the tax also had to be assessed by examining the increases in taxation and other costs that will now apply to local businesses,” the BCCI said, as it reiterate its commitment to working with Government to ensure greater transparency in the monitoring of prices.