‘Don’t expect to save on clothes after duty cut’

photo

James Smith

By RASHAD ROLLE

Tribune Staff Reporter

rrolle@tribunemedia.net

ALTHOUGH the Minnis administration hopes Bahamians benefit from customs duty waivers off clothes and shoes for retailers, former government ministers say businesses have historically failed to pass savings from exemptions to consumers.

James Smith, former state minister for finance and Central Bank governor, said Monday: “Politicians like to announce customs duty waivers to give good news with bad news. Though it’s good for a soundbite, when you look at the impact, it’s usually not significant.”

Deputy Prime Minister and Minister of Finance Peter Turnquest acknowledged the problem in an interview on Monday, saying the government will encourage aggressive consumer activism from Bahamians to influence pricing.

“The duty reductions are intended to pass on to the consumer because this is a cushioning measure with respect to the increase in value added tax,” Mr Turnquest said. “It doesn’t work if the businesses themselves take it. It’s not intended for that.”

Any business that sells clothes, shoes or buys apparel, fabric, thread, zippers and buttons can benefit from duty waivers starting next month. It’s a move intended to soften the blow of value added tax’s increase to 12 percent and is aimed toward helping the most vulnerable people in society.

But on a recent television programme, former State Ministers for Finance Zhivargo Laing and Michael Halkitis both expressed scepticism the move would accomplish its goal.

Mr Smith agreed, saying the issue is relevant as the country moves toward the World Trade Organisation (WTO) because declining duty rates won’t necessarily produce lower costs for consumers. As duty rates decrease, other taxes are expected to increase.

“When the duty is removed there is a tendency for the businesses not to lower prices at the same amount but to keep the difference up,” Mr Smith said on Monday. “It’s very difficult to regulate it because the business will always justify it by saying there’s so many items in the overhead and that when they were selling stuff they were just breaking even or they were already giving a break to customers. It’s only the consumer himself who could put pressure on the stores as a group rather than an individual because if it’s just an individual they’ll only turn you around.”

Asked how the government will get businesses to pass on their savings, Mr Turnquest said an education programme will be launched to promote consumer activism. He said social media is a useful medium for organising such activities.

“We want people to get involved in helping us to identify areas where we see price gouging or price taking,” he said. “It is not the intent for the government to pass these savings on to the businesses. At the end of the day VAT is not a tax on the business, it’s a tax on the consumer and we’re trying to protect and cushion the most vulnerable consumer that we have. It’s the most reasonable way for us to create a progressive taxation that people talk about. We’re going to have a very aggressive consumer protection system and education. Historically we know how the pricing order works in the Bahamas. It’s not very sophisticated. For market forces to work it requires an informed consumer and for that information to be widely available so people know what competitive prices and forces are available to them. The Ministry of Finance will be doing some things to try and help the consumer to be educated as to what the landed cost of a product is now and what it ought to be after these measures come into effect so that they can have the power and knowledge to go out and challenge some of these things.”

Bahamas Institute of Chartered Accountants President Gowon Bowe said as opposed to relying on “moral suasion” to influence how businesses price their goods going forward, the government could have “surveyed a sample of businesses and sought pricing strategies confidentially and work out expected reductions.”

“If (there is) no duty,” Mr Bowe said, “businesses have to decide what additional costs of landing are incurred verses online price and landing for consumers.”

Comments

Dawes says...

From what i have read, in order to get the duty waiver the company would have to show how they will reduce their prices to pass this on. If they are not then they can pay the current duty rate. It should also be noted, that just because the duty rate might change, this does not mean the company is not selling items that they did pay duty on. As it will take them a while to get through the duty inventory.

Posted 13 June 2018, 9:48 a.m. Suggest removal

ohdrap4 says...

And, if they do not reduce the prices, no big deal, people will continue to order from amazon.

the real opportunity here is for smaller businesses aka carpetbaggers who will bring their clothes duty free and undercut established businesses.

I suppose the proof of price reduction can only be given if the margins are kept the same, are clothes price controlled now?

Posted 13 June 2018, 10:18 a.m. Suggest removal

DDK says...

WTO is a joke as there is a huge trade war looming between major players on the international trade stage. Do not understand why The Bahamas, with virtually no exports, has decided to give in to pressure to accede to this organization.

Posted 13 June 2018, 10:56 a.m. Suggest removal

licks2 says...

WAR BETWEEN WHOM. . .

Posted 13 June 2018, 3:31 p.m. Suggest removal

DDK says...

Businesses will pass on the savings if they want customers to purchase the merchandise from their 'brick and mortar' stores.

Posted 13 June 2018, 11:08 a.m. Suggest removal

birdiestrachan says...

it may be that the Government has friends in the clothing business as in the car business
the airline business and the aviation business as well as the wash house business that
wanted the duty removed.

But there is always JC Pennys and other Florida bases business and with the $500 dollars
exemptions here they go. Without Vision the people perish,

Posted 13 June 2018, 1:26 p.m. Suggest removal

ohdrap4 says...

the plp must have had friends in the costume jewelry business when it turned costume jewelry duty free.

Posted 13 June 2018, 3:24 p.m. Suggest removal

birdiestrachan says...

D'Aguilar, the PM Minnis and Brent Symonette all have shares in the liquor business,
commonwealth brewery. No tax increases for the liquor business. of course not.. their
shares will decrease . and that would not be good for their pockets . So tax the poor..

Posted 13 June 2018, 2:07 p.m. Suggest removal

licks2 says...

Birdie. . .YOU IS A SHAREHOLDER TOO. . .THAT WHAT HAPPENS WHEN YINNA PLP PARTY DON'T TAKE TIME TO "LEARN YINNA" ANYTHING!!

Posted 13 June 2018, 3:35 p.m. Suggest removal

JohnDoes says...

Having no VAT on shoes & clothing doesn't mean that Bahamians will not pay double what the shoes & clothing are actually worth, that's how those businesses thrived before VAT. $40 for a pack of 5 Hanes undershirts will still be $40, even though it is only worth $19.

Posted 13 June 2018, 3:51 p.m. Suggest removal

ohdrap4 says...

there will be VAT on shoes and clothing. There will be no duty for merchants.

However, a sure sign that prices are not coming down is that there are no sales going on.

Before VAT many merchants had 35% sale to get new inventory.

As i said, no worries. As long as amazon loads, i will not be naked.

Posted 13 June 2018, 4:13 p.m. Suggest removal

JohnDoes says...

That is also why the Freight Forwarders are trying to kill consumers now, because they know how much people will revert to online shopping.

Posted 13 June 2018, 4:18 p.m. Suggest removal

hrysippus says...

This man has not worked in s proper job in the private sector for decades, if ever. He has always been a fiscal parasite like the rest of our civil servants. He has no idea of the challenges of running a business and is not qualified to comment. The Tribune reporter could just as well asked Frederick Mitchell for his opinion, it would be just as much value.

Posted 13 June 2018, 5:06 p.m. Suggest removal

The_Oracle says...

Amazing how they will pillory Merchants Before the event whether prices drop or not.
Their sins as former Government and Civil servants is creating the deficit and national debt we now have to pay for. That ongoing dirty deed is done.
Nice diversionary Tactic.
Meanwhile, instead of demonizing those in society that you cannot do without, try educating the Bahamian people on where their increasing cost of living and lack of opportunities really come from!

Posted 13 June 2018, 6:47 p.m. Suggest removal

The_Oracle says...

Anyway, I'll tell you what not to expect: Fiscal accountability from Government, scaling back expenditures, Reduction in deficit or national debt, or any new found honesty.

Posted 13 June 2018, 6:52 p.m. Suggest removal

John says...

The fact is that many retail clothing and shoes businesses are operating at a loss. Just look at how many close down every year. First for clothing (not clothes) and shoe prices to go down government must enforce duty on these items being brought into the country by persons who do not have a shop license but sell from their cars or homes. Secondly while they are removing the duty of clothing and shoes, which should have been done when VAT was introduced, they are also increasing the duty exemption for Bahamians who travel by $200.00. A 20% elimination in vat does not necessarily correspond to a 20% reduction in the price of the item. The overhead and total cost of doing business in the Bahamas is much greater than Florida. Freight from Miami to Nassau is almost double freight from New York to Miami.

Posted 13 June 2018, 7:14 p.m. Suggest removal

John says...

> $40 for a pack of 5 Hanes undershirts
> will still be $40, even though it is
> only worth $19
>
> Blockquote

.
JohnDoes..Walmart owns the Hanes company so when you purchase Hanes items from Walmart, you are actually buying below wholesale. The same pack of T-shirts that cost $19 in Walmart will cost $26.00 in other stores and as much as $30.00 in some malls in Florida. A merchant buying that same pak of shirt will pay more than you are buying it for in Walmart and after adding freight and duty the Nassau price will be around $40.00. And remember the store adds value by bringing it here to Nassau for you. That is a cost that Bahamians don't like to factor in when comparing Miami prices with Nassau prices.

Posted 13 June 2018, 7:33 p.m. Suggest removal

The_Oracle says...

#1 income earner from any Bahamian goods supply business? The suppliers
#2 income earner? Payroll (staff)
#3? Bahamas Government
#4? Power co, phone co
And the list goes on. Store owner is usually around # 6-8
4-5 years ago you'd have made more money on on your money in interest in a bank.
That is obviously no longer true......

Posted 13 June 2018, 7:41 p.m. Suggest removal

killemwitdakno says...

Isn't Trump trying to tax internet shopping? So that's an increase in 7% + VAT increase on what you pay the courier when shopping on their computer.

Posted 1 July 2018, 12:52 p.m. Suggest removal

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