I have looked at the calculations done on the effect of the changes in the VAT system as published in articles in the newspapers.
Examples have been given of people who spend $800 a week on groceries and a statement has been made that with the imposition of VAT on a number of items that were previously zero rated, that person’s grocery bill will increase by $300 per week.
These calculations are completely wrong.
In the first place, a number of basic food items, such as rice, flour, bread and cheese are still zero rated and in the second place the rate of VAT is now 12.5 per cent.
And so assuming that of the $800 per week spent by this person on groceries, about $400 maximum will now attract additional VAT at 12.5 per cent, the increase is only $50 per week and not $300. And this is an extreme calculation because less than $400 out of that $800 per week is likely to attract additional VAT. In fact, in the impossible event that none of the $800 spent previously attracted VAT, the maximum increase could only be $100 per week, ie $800 x 12.5 per cent, and not $300.
Another example given in your paper of a taxi driver, who spends $1,200 per month on basic grocery items, who will now allegedly have to put out an additional $300 per month, is also completely wrong. Again, most the items mentioned are still zero rated, and further, assuming that at most, half of the grocery items purchased by this taxi driver will now attract VAT, his bill will go up by $75 per month and not $300, ie $600 x 12.5 per cent.
Again, this is an extreme case because less than half of the basic items mentioned are now subject to VAT, so the increased cost for the taxi driver may be no more than $50 a month. It is certainly not $300.
Colm Imbert