Is Price Gouging Rampant?

Although President of the Saint Lucia Manufacturers Association Paula Calderon as well as the St Lucia Hotel and Tourism Association have voiced several concerns over the recently implemented Value Added Tax (VAT) here, not much has come out of the Saint Lucia Chamber of Commerce since the October 1, implementation date. Brian Louisy executive director of the Chamber told the STAR this week that his members have been advised to temper their assessments over the new tax system with caution.
“We are aware that people will experience some discomfort and some anxiety but we want members to be a lot more measured in what we say. We have asked them to identify whatever issues they have and those they feel that they are unable to deal with, share with us and if it is something we can speak to as a body, then we will do so,” Louisy says.
So far the executive director of the Saint Lucia Chamber of Commerce says his organization has gotten no serious feedback one way or the other as to the October 1 implementation of VAT.
“Initially you expect that shock factor,” Louisy says noting that the real challenge will not be seen until November 21, 2012.
“That’s the deadline by which persons will have to submit to Government their VAT collected. That’s when I think some real issues will arise. Can persons account for what has been collected and subsequently claimed?” Louisy asked.
The deadline period for submissions also weighs on the mind of Thomas Leonce, National Sales Manager at Windward and Leeward Brewery Ltd, one of the largest manufacturers here. More specifically how quickly remittances would be made to businesses by the VAT office is a question yet to be answered, as well as the effective monitoring as to how some wholesalers and retailers account for their collection practices.
Asked about how WLBL was coping since the implementation of VAT Leonce says the company’s transition was quite smooth.
“We made software upgrades quite a few times over the years. In fact all of our software suppliers operate in an environment where VAT exists, so you would find that the system may have contained a file for introducing VAT already, even though it was not previously used at all. So the transition was quite easy from that standpoint,” Leonce explains. “Then again, we had already moved away from manual invoicing of all our customers. For years now we have been using a hand held computer system on the road so it was just a matter of clicking a box now saying add fifteen percent VAT and right away your invoices can show that difference, as opposed to moving from a manual bill book to a computer,” he added.
Being an established manufacturer and having the resources enabled the company to make the transition from those standpoints a lot easier the Sales manager told the STAR.
In terms of actual buying trends since October 1, Leonce says it is too early to determine.
“The difference is that in the past where there have been price increases they have been driven by us to cater for raw material increases globally. With VAT, not only are our prices are affected but every other supplier, so consumers are now not only thinking about the price of our products but the price of everything else they buy. So there will be a lot more caution than would have obtained but it is something we are monitoring,” he says.
The WLBL executive is however calling on retailers to be cautious in their price structures so as not to drive the country further into inflation and consumers to be a lot more cautious and savvy when confronted with choices in making purchases.
One of the “misunderstanding” as he calls it which bothers him is the question of some companies compounding VAT or adding VAT on VAT. Leonce explains, “What you find is that if I supply a company with a product with VAT added, when they are doing their pricing they are not supposed to take into consideration the VAT that I have charged them. So if say for example a case of Piton is EC$50. It is sold to retailer at EC$50 plus 15 percent VAT which is EC$7.50, so he pays EC$57.50. What they must now do as a VAT registered retailer is take my price of EC$50 add their mark-up, say EC$5 per case and this is what you charge  VAT on, EC$55.00 which would be (55 plus 8.25) EC$63.25.” However what some VAT registered retailers are doing according to Leonce is that they are taking the wholesale price plus VAT which is EC$57 50, adding an EC$5 mark-up which drives the price to EC$62. 50 and then adding 15 percent VAT. The new price to the consumer would then be EC$71.80.
“The business is not benefitting from doing that, but the consumer is suffering when they purchase the final product from that error,” Leonce says. He has also warned bars and shops against out pricing themselves, stating that while the price of some of their products have gone up by just a few cents per bottle, some are adding as much as a dollar, even two dollars per bottle.
“We want consumers to be aware of this. This is not our pricing and it is for this reason we have been publicizing what our prices were before VAT and our new VAT inclusive prices,” Leonce says.
Since the implementation of VAT not only WLBL, but companies like LUCELEC, WASCO and others have issued public statements and advertisements as to how the new tax will affect consumers. Even at the STAR we’ve had reason to issue statements warning customers to be on the guard against price gouging as several persons reported paying escalated prices unauthorized by the STAR for newspapers. However, with the island having no Consumer Rights Protection Act, many are just counting on a slow and grinding process of consumer education and reeducation, as well consumers awareness of their spending power and choices as the island goes through some teething problems with VAT implementation.