By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Food retailers say the near three-month transition affords sufficient time to adjust computer systems and shelf prices while calling for urgent clarification on which items fall under the reduced 5 percent VAT rate.

Debra Symonette, Super Value’s president, told Tribune Business that the 50 percent VAT rate reduction unveiled by the Prime Minister last week will “require a bit of work” from the private sector to implement because administering the tax for food stores is now more complex since they will be dealing with different rates for different goods.

Non-food items, such as laundry detergent and bathroom tissue, will remain at the existing 10 percent with the reduction to 5 percent applying to most food items. Ms Symonette and the 13-store supermarket chain’s owner, Rupert Roberts, also called on the Davis administration to provide greater clarity on which food items will attract the new rate and those that will remain at the existing one.

Grocery stores and wholesalers have been given until April 1, 2025, to adjust systems and pricing as this is when the cut to 5 percent will occur. “I reckon the three months is going to be enough,” Ms Symonette told this newspaper, “but it is going to require a bit of work because we have to go into our systems and adjust multiple items.

“When it’s one percentage for all items, it’s a bit easier but now we have to pick up on certain items and change them, it will be a little more difficult. We also have to change prices on both the items affected and the shelf. Hopefully they [the Government] will accommodate us by adjusting the return form that we submit so it will be simple to go line by line and fill it in for certain categories.

“Right now there are items that have VAT and don’t have VAT, but now we’ll also have items that at 5 percent and others that are 10 percent.” Ms Symonette and Mr Roberts also called for the Government to provide “more specifics” on which food products will attract the 5 percent VAT rate from April 1.

“We would definitely like clarification on the items,” she said. “Because, right now, it’s a very broad category. I think they termed it edible foods or consumable items. We’d definitely want them to be a little more specific on that so everyone will adjust the proper items. That’s what we need clarification on.”

Ms Symonette cited tomato ketchup as an example of the items the food retail and wholesale industry are seeking clarity on. “You literally don’t eat ketchup,” she said, “but you do put it on the food you consume. I understand we’re going to get some kind of guidelines, so we’re looking forward to that.”

Mr Roberts added: “We could have that [5 percent VAT] implemented this morning, but we’re not absolutely sure on all the items. It needs a little more clarification. We understand it’s edible foods only. An item like baking soda is an edible ingredient, so we think they will include that.

“There are some grey areas that we need clarification on otherwise different food stores will have different items [at 5 percent]. Legally, they have to be exact. We hope more clarification will come through.” Mr Roberts said the food distribution industry would also work with the Government to address transition issues such as aged inventory that was imported at 10 percent VAT at the border but attracts 5 percent come April 1.

In such a situation, the 5 percent ‘output’ VAT collected by retailers from consumers would be exceeded by the 10 percent ‘input’ they themselves paid to purchase food stock. Retailers would thus potentially end up paying more in VAT than they collected, resulting in them having to claim a refund or credit from the Government.

“I think in three months that it will all be moved out,” Mr Roberts said. “There’s very few items we go that long on. We were carrying three-four months inventory in COVID, but after that cut inventory to a month. That’s speaking of the warehouse. Anything we pay 10 percent on should be moved out in three months or we can catch it.

“It’s a point that we have to watch. It’s something the Government probably didn’t think of. I didn’t think of it until you brought it up. We could be paying one VAT rate and selling it off at the other. They [the Government] haven’t said anything about adjustments, but if it becomes a problem they’ll work it out.

“They won’t expect us to donate our profits. That will create a 5 percent loss for us. We have to watch that doesn’t happen. We’ll have to consider that. If we see a problem we will have to ask the Government about it. It could become a problem if it drops to 5 percent and we bought those products at 10 percent.”

Mr Roberts said he suspected the Government delayed implementation until April 1, 2025, to avoid giving up too much revenue for the 2024-2025 fiscal year via the food-based 50 percent VAT rate cut as well as give retailers and wholesalers sufficient implementation time.

As to the benefits for consumers, the Super Value chief said: “Every little bit helps. I think we know the public wants more and I’m sure they’ll appreciate it. We’re happy to pass it on to them because they really needed it. That’s why the Government took the action to give it to them. The consumer, they need more and they want more. They’d want the whole 10 percent, but we and the Government couldn’t do it.”

Steven Key, general manager of the d’Albenas Agency, said of the 50 percent VAT rate cut: “Of course, as a wholesaler, we won’t know the full effect of it until we see the details because does this mean that there’s going to be a reduction in the food store VAT, but not in other customers that we sell to?

“Will the restaurant still pay 10 percent VAT for the very same items? We don’t know. Certainly it would be good to have the information disseminated because we’ll need to know how to proceed.” Mr Key said whether the implementation date of April 1 is too short a timeframe, depends on what the company needs to do to “accommodate” the changes.

“It really all depends on what we need to do internally to accommodate two different sets of VAT rates for different customers,” Mr Key said.

“If you have the very same item that’s sold to a food store or a restaurant, then right now everything is the same VAT. But if you have to go now and take that same item and determine who gets 5 percent and who pays 10 percent, then there’s computer programming probably involved. And that all depends on the programmers as far as how long it will take.”

In terms of clearing out inventory brought in on 10 percent VAT, he added that the company is “able to claim back against the VAT”.

“Being a company our size, what we purchase to run our company we are able to claim back against the VAT that we paid the Government on the imports,” Mr Key said. “So I have to get with the accounting team on that, but I don’t know how much of a factor that will be. That may be more of a factor at the grocery store level.

“But as far as a reduction in VAT, that’s great for us all. My wife goes to the food store to buy groceries, it’ll be 5 percent less. VAT is a consumer charge. That’s where the end of it is, at the consumer. When they buy something, businesses claim back on VAT, but consumers don’t have anything to claim back, so they’re the ones that bear the full price of the VAT.”