President of the Supermarkets Association of T&T Dr Yunus Ibrahim says a 2.5 per cent reduction in Value Added Tax (VAT) can mean consumers will pay more for food.
In an interview yesterday, Ibrahim explained t Government plans to review the list of zero-rated items and apply VAT to many of them. VAT was removed from 7,000 items under the last government.
Once VAT is applied across the board, Ibrahim said, consumers could end up spending more as each customer's VAT cost would depend on the goods in their baskets.
He added: "First and foremost, it depends on what they (Government) put back on the VAT list. Then it is the consumers' choice to go in between the other items and buy it or not. They said they are reducing the zero-rated items and luxury items after review. They are going to increase the amount of items that are 'vatable' but decrease the rate of VAT.
"That itself is wonderful for electricity, water and other utilities because it is across the board but not as it applies to food. Remember your kilowatt rate an hour is not going up so your bill will come down but you are buying the same groceries.
"If you have 100 items in your basket now and 15 are 'vatable,' imagine if they increase that figure from 15 to 35. Obviously even at 12.5 per cent what comes out of your pocket is going to be more in VAT and the net figure."
Ibrahim said consumers' concern was whether the price of grocery items depended on whether the VAT reduction was passed onto them by the various suppliers.
Although the cost of some products were initially reduced when the former People's Partnership government removed VAT from 7,000 items, he said inflation caused the prices to increase.
He added that T&T had a free market in terms of prices, saying the same items in a supermarket can cost more in other places.
"What we can say is that if it is passed on to us by suppliers in this fierce competitive supermarket environment that exists in Trinidad and Tobago, trust me it is going to be passed on to the consumer.
"The suppliers on the other hands are the ones who are at that mercy, not the supermarkets. We are a free market here. You will buy a juice that would be $2 more in a pharmacy, it is up to your where you buy it," Ibrahim said.
During Monday's 2016 Budget presentation, Finance Minister Colm Imbert proposed to decrease VAT from 15 per cent to 12.5 per cent.
This would be done in tandem with reviewing and adjusting VAT exemptions and zero-rated items which, he sai., were associated with non-essential items and were not critically important to citizens' livelihoods and basic cost of living. Together, he said, that was expected to yield $4 billion in tax revenue.
