What price gouging?
executive refutes claims businesses would profiteer from new levy
One of the island’s largest private sector groupings is confirming that retail prices will rise above two per cent following the implementation of the National Social Responsibility Levy on Thursday,
However, the Barbados Chamber of Industry and Commerce (BCCI) said speculation that prices would skyrocket on the same day and that businesses would seek to profiteer was far from the truth.
University of the West Indies economist Dr Troy Lorde had told Barbados TODAY in a story published yesterday that not only would Barbadians pay more for goods when the levy took effect, they should also expect to see more than a two per cent hike in costs.
“The two per cent tax of course will naturally filter down to consumers. It is not going to be absorbed by businesses. We’re talking about imports – food, appliances, consumables, it is going to be coming to the consumer,” Lorde said, explaining that like all taxes, the levy was compounded, so wholesalers and retailers would have to apply a range of additional costs, including the Value Added Tax.
Today, BCCI President Eddie Abed said consumers should expect price rises of between four and six per cent.
Since Minister of Finance Chris Sinckler announced the unwelcome new tax in the recent Financial Statement and Budgetary Proposals, a cross section of the society has been expressing concern that prices would increase beginning September 1, and that businesses would engage in price gouging.
Sinckler had announced that the new levy applied at two per cent on the customs value of all imports at the border, with the exception of goods for the manufacturing, agriculture and tourism sectors would assist in offsetting the costs associated with financing public health care services in Barbados.
All locally manufactured items for local consumption will also attract the new tax, through which Government is expected to raise $142.1 million annually.
Abed told Barbados TODAY he was confident that the local business community was responsible and would pay a great deal of attention to the details, but would not engage in any price gouging when the new tax becomes effective.
“I hear again talk that there may be need for a separate entity to police these prices, and I assure you that in a competitive environment like this, there will be no need for that. The market forces will determine cheapest product at best quality, and availability will gain greater market share in the market place. So I am confident that we won’t even have to consider that, but there will be an increase. There is no question in my mind there will be an increase at the retail level,” Abed said.
“I don’t want to add fuel to the fire about price gouging because it is just not true. It is completely way off the mark. There is nothing further from the truth than that. The only thing I can say is that there wasn’t clarity to begin with and if there is no clarity is causes confusion, but now we are beginning to see that the confusion is abating. So I don’t think there needs to be a concern at all.”
It is anticipated that the new tax will affect just over 60 per cent of consumer imports.
In making his announcement Sinckler had pointed out that based on analysis, the impact might not be felt immediately given “the very high import content” and the time it takes to adjust consumption patterns.
Stating that the business sector was “about 95 to 98 per cent” clear on how the new measure would apply, Abed told Barbados TODAY that based on the way the tax was calculated “by the time it gets to retail, [it] should be somewhere between four to six per cent because it is compounded, and it is also compounded with a profit margin as you would understand.
“So the net result is that the cost of goods in Barbados will start to increase. There seems to be irresponsible chatter out there that the increases will start immediately and that is quite frankly not true. As the goods are being replaced, as the goods are being replenished, one will see the increases going into effect. And I hasten to add that these increases will be kept in line by extremely tough economy that retailers and distributors are selling into. The competitive nature of the economy will dictate that prices are kept in check,” Abed stressed.
Insisting that the increase in operational costs as a result of the tax would have to be passed on, the businessman said market forces would also determine how much of it would be passed on to consumers.
And with the expected busy Christmas season only a few months away, Abed said local retailers and distributors were in for “interesting times”.
“But clearly if you have a market that is fragile and you have a price increase, one would expect to sell less units and that is a given,” he added.