Although some sectors and individuals approached Government for special consideration with the new 12.5 per cent VAT on former zero rated items, the new tax is now in place across T&T as of midnight.
Finance Minister Colm Imbert, responding to questions from T&T Guardian on the new VAT regime, confirmed that some sectors/individuals had asked for special consideration.
Imbert said: “I wouldn’t describe them as many, nor would I agree that a wide variety of basics are now subject to VAT, since in the main, the items that are now subject to VAT at the reduced rate of VAT, are not basics and many basics are still zero-rated.
“One should note that VAT is an instrument of fiscal policy. It is not, as some people mistakenly believe, an instrument of social policy, and is simply intended to raise revenue. The more exemptions there are, the more revenue leakage there is. There were far too many exemptions which weakened the revenue collection system to the point that the Government was only collecting 40 per cent of the VAT that it could potentially collect. Most countries in the world collect at least 65 per cent of potential value added taxes or consumption taxes.”
Following government’s passage of legislation in both Houses of Parliament last month for the 12.5 per cent VAT rate, business places, particularly groceries, began preparing for the new VAT level implementation. One large Marabella supermarket which was not as crowded as it usually is, informed customers that prices had been removed from various items for the change. Prices remained on other goods which would not attract VAT. Several lanes of that supermarket—canned goods, certain dairy items—had items from which the former price was removed awaiting the new 12.5 percent VAT.
Commenting on the new VAT regime, Imbert explained: “As you lower income tax which was done over the years, you must balance revenue loss with a consumption tax which is what VAT is. One can’t keep exempting things from VAT since you destroy revenue earning.
“My wish is that over a period of time—it could be years—eventually, there could have no exemptions and only simply, a general sales tax of about eight or nine per cent,” Imbert made it clear that was what he said when he spoke at a recent post-Cabinet media briefing on the VAT level issue.
On accusations that VAT on certain printed matter would destroy some people’s ability to buy schoolbooks and become educated, Imbert said that was mistaken although he acknowledged some—booksellers included—weren’t clear on the situation.
“Books meaning workbooks, activity books, exercise books and other similar books for educational purposes for use in schools, colleges and other educational institutions are still exempt from VAT,” he stressed.
On what systems are available to prevent consumers being plagued by price gouging as consumers make the adjustment, Imbert said: “We operate a free market system in this country. There are no price controls in T&T in the modern era. Price controls were discontinued over 25 years ago. The only instrument available is publication of prices by the Consumer Affairs Division so that consumers can make informed choices.”
The Opposition has criticised Government’s 12.5 VAT initiative and called for a softening of the system.