Customers should brace for 4.5 per cent VAT increase
Customers of “The Bigger, Better Network” can prepare to pay a bigger slice of the 22 per cent Value Added Tax (VAT) which Government imposed on mobile phone services at the start of this year.
The cell phone provider is hinting strongly that it will begin passing on to subscribers, the additional 4.5 per cent in VAT charges on phone and data services, possibly from the end of this year or early next year.
The Freundel Stuart administration announced late last year to much consternation that VAT on mobile phones and data use would rise from 17.5 per cent to 22 per cent effective January 1 this year.
Following its imposition, Digicel’s Regional Chief Executive Officer Paul Osborne announced on January 7 that the company would absorb the additional 4.5 per cent at a cost in excess of $1 million annually.
“The people of Barbados deserve to start this historical year off on a celebratory note and as such Digicel is delighted to announce that we will not be passing the VAT increase of 4.5 per cent on mobile services to all of our prepaid plans, our postpaid smart plans and our business customers,” Osborne said at the time.
This was music to the ears of Digicel subscribers, and while some customers of rival Flow said they were prepared to wait and see, others told Barbados TODAY at the time they were prepared to switch providers.
The decision apparently paid dividends for the Irish telecommunications company, with Chief Executive Officer Conor Looney announcing a month later that there had been a “bounce” in the number of subscribers.
“We have seen a bounce . . . the fact that we actually absorbed the VAT for those customers we have certainly seen an increase in subscriber numbers, and we have also seen an increase in data plan subscriber numbers,” Looney said at the time.
However, the telecommunications executive made it clear in a recent interview with Barbados TODAY the honeymoon would not last forever and a decision was likely following a review at the end of this year.
“This is a year of huge significance for the country and it is our opportunity to give value to our customers and also give back. And in that thinking it was that we would actually absorb the VAT for our postpaid and prepaid customers who are on data plans with Digicel. And that will continue and continue for another period of time. Obviously it is not something we can continue forever, but it is something that will continue definitely as we progress for the next number of months,” Looney explained.
“It was something that was announced at the beginning of the year as a way of giving back in this year of celebration and at one point later this year it definitely will be reviewed,” he emphasized, suggesting the absorption was only for Barbados’ 50 anniversary of Independence this year.
After the announcement that it would absorb the VAT increase, it later emerged that Digicel had made adjustments to some of its rates and data packages for prepaid customers.
The mobile company published a rate sheet online, which reflected a single rate of 56 cents per minute for Digicel to Digicel calls made during the day, evening and weekends. Also, instead of talking for three minutes and getting the other 57 free, customers would have to talk for four minutes in order to get the other 56 free.
The new 56 cents rate compared with previous Digicel to Digicel mobile calls of 55 cents during the day, 49 cents on evenings and 32 cents on weekends. Calls from a Digicel mobile to “other mobile” also rose from to 78 cents from 72 cents for weekdays, among other higher charges.
Marketing executive of Digicel (Barbados) Limited Marc Massiah later confirmed the changes, telling Barbados TODAY at the time the company had “put in a small price adjustment to our prepaid calling rates and announced this online as is customary”.
Meanwhile, Looney revealed that the company’s market share was continuing to rise.
He did not give figures to support his claim, as he announced good response to the prepaid home phone service launched in February.
“Already we have thousands of customers on that service and people are joining for the three services that we bundle together, which is the television service, the home broadband service with internet speeds of up to 1 gig a second, but also the home phone,” he told Barbados TODAY.
The telecommunications executive explained the fact that subscribers did not pay a monthly rental for the phone made the service an attractive one.