Consumers will have to pay only $50 more on their monthly grocery bills as a result of the removal of items from the VAT zero-rated list and the reduction of the 15 per cent tax to 12.5 per cent.
Finance Minister Colm Imbert made that startling revelation yesterday while presenting the Finance Bill 2016 for debate. His claim was dismissed by Opposition Senator Wade Mark, who said the cost increase would be closer to $150 a month.
The bill removes 99 categories of items from the zero-rated list and also reduces the VAT rate from 15 per cent to 12.5 per cent, increase the Business Levy and Green Fund, increase the Personal Allowance from $60,000 to $72,000 and provide certain other benefits to citizens 60 or over.
Since the measure was approved in the House of Representatives last week, Imbert and the PNM Government have been criticised by many—including the Opposition—who claim the VAT changes would significantly increase the price of goods. But he said the speculation by many was wrong.
Imbert said he asked the appropriate unit within his ministry to look at a typical household earning between $3,500 and $7,000 a month. He said those households were about one-third of the households surveyed by the Central Statistical Office.
Imbert told legislators the survey looked at the expected changes the new VAT rates were likely to have on consumers, adding that when a proper calculation was done on what prevailed before and what is there now using the retail price index from November 2015, surveying about 15 regions in the country and using the data from the households budget survey “what we get is that the increase in cost for a typical household with an income of about $7,000, the increase in cost of the changes is $50.63 per month.”
The minister said some 50 items were checked and “that’s the economic calculations that my economic management unit has come up with.”
He said among the items checked were bread, rice, flour, corn flakes, macaroni, biscuits, pork, chicken, pigtail, corned beef, fish (including fresh and imported), canned sardines, milk, cheese, eggs, margarine, oil, tomatoes, carrots, split peas, Irish potatoes, corn curls, cheese balls, brown sugar, onions, ketchup, mayonnaise, baby formula, instant coffee, Milo, sports and energy drinks, carbonated soft drinks, and fruit drinks.
Imbert said that information was factual.
He said he could not understand how a newspaper could report that the new rate would cause food prices to increase by between 30 and 40 per cent. He said if the VAT was “12.5 per cent, the maximum possible increase would be 12.5 per cent."
He also commented on the removal of salt from the zero-rated items. Opposition Leader Kamla Persad-Bissessar was critical of the move during a news conference at her office in Port-of-Spain on Wednesday. (See Page A7)
Describing the concerns as “a whole hue and cry about salt”, Imbert said the commodity was “the least expensive item in the supermarket. How much does someone spend on salt for the year, $20?
He said there was “a big noise about VAT on salt,” which retails for about $3 or $4.
Imbert said it was mainly processed foods that were removed from the zero-rated schedule.
He insisted all vegetables, provisions, fresh meat, fish, parboiled and brown rice, all-purpose and wheat flour, baby formula/baby milk, margarine, cheddar cheese, corned beef, sardine, curry, toilet paper, oat meal, peas and beans were still zero-rated items.
Imbert also reminded the population of the prevailing economic conditions and the need to view it with the required seriousness. He said the price of oil (West Texas Intermediate) dropped to US$29.20 yesterday. He spoke of the enormous energy shock combined with the reduction in domestic oil and gas production. “Everyone has to understand the reality of the situation that we are in, it is no laughing matter, it is serious,” he said.