Christmas came early on December 20 for many Barbadians who took advantage of Government’s surprise Value Added Tax (VAT) free day.
With the announcement coming late over the weekend, retailers were left scrambling to put all the necessary measures in place – some back office, such as required changes to their pricing systems, and others, front office – which included scheduling sufficient staff to manage the crowds that were expected and sourcing supplies to replenish shelves.
As expected, it was the supermarkets which saw the crush of people seeking respite from the 17.5 per cent tax. The long lines of shoppers who gathered from as early as 4.30 in the morning, not only speak to just how burdensome the cost of food is in Barbados, but that they were prepared to expose themselves to increased risk during a pandemic with several highly infectious variants in circulation.
To a COVID-19 exhausted public, the VAT-free exercise provided some escapism for citizens from the daily diet of depressing news. For the administration too, the day provided some temporary relief from the many fires it is battling on several fronts including an increasingly controversial nurses’ strike.
The VAT-free day was most welcome, for the cost of living is something that knows no political divide. And in a period of persistently high unemployment which has been worsened by the pandemic, economic and kitchen table issues will continue to be front burner matters for the average citizen.
It is for this reason that some shoppers expressed a tinge of disappointment that their supermarket bill was not reduced by as much as they had expected.
Of importance, however, is the fact that global food prices have been on the rise for several months. Supply chain disruptions, specifically at the manufacturing and production levels, as well as clogs in the shipping sector are partly responsible for the increases in food and other basic items.
Equally important also is the fact that many essential items on our supermarket shelves do not carry VAT and so, some shoppers looking for a steep reduction at the cash registers, were disappointed after spending hundreds of dollars.
According to the Barbados Revenue Authority (BRA) the list of zero-rated VAT items is quite extensive. They include mineral water, table salt, bread, pastries, cakes, biscuits, pastas such as macaroni, chow mein, noodle, and spaghetti, preparations for infant use, sardines, tuna, mackerel, luncheon meat, corn oil, margarine, rice, most fruits and vegetables, dried vegetables including peas and lentils, fresh eggs, most milks and creams, salted fish, chilled and frozen fish. The list is extensive.
So, unless one had a trolley filled with speciality items such as Basmati rice, liquor, steak, shrimp, salmon, mushrooms, and high-priced teas, your grocery bill might not have moved downward by that much.
Another critical issue that arose from the VAT-free Christmas gift compliments the Ministry of Finance was whether administering this tax has not become too burdensome and if a simpler sales tax might not be a better option for us.
The cries of business operators that the event was too sudden and did not allow them enough time to handle some of the administrative processes suggest that maybe it was time to reconsider the usefulness of the VAT.
Critics of the VAT often argue that it punishes the poor and is regressive because it is based on consumption rather than on income. The poor, lower and middle classes have few ways of escaping the tax unless they grow what they eat.
Critics also argue that VAT, which is added at every point of the supply chain, is a heavily bureaucratic system on businesses. Despite its much-vaunted introduction to Barbados, several tweaks have been made over the years by various administrations.
Local businesses have complained about the length of time it takes for government to honour refunds due to them. On the other hand, Government has been lambasted by the public for seemingly allowing companies to collect VAT and not hand over the money to the Treasury.
Our current rate of VAT is 17.5 per cent, however, the VAT on mobile telecommunication services is 22 per cent.
The threshold for VAT registrants has also changed over the years in an effort to lessen the burden on the government and small and micro-enterprises. In January 2010 the threshold was moved from annual sales of $60,000 to $80,000. From January 2016, the threshold was again increased to annual sales of $200 000 or $16 667 monthly.
What has become evident is that VAT is a great revenue earner for Government but it is also a headache to administer. And though basic consumer goods are exempted the VAT is still burdensome for those who can least afford it, especially in an environment where the cost of most imported items are on the rise.
