Tweak might mean $2 off a $100 grocery bill
Tax cuts announced in the budget should have a small impact on household bills, including an estimated $20 reduction on monthly power costs of $500 and a $2 cut in weekly grocery bills of $100.
While the cut in fuel duty to Caribbean Utilities Company will be automatically passed on to customers, there is no mechanism to ensure a reduction of 2 percent on duty for licensed importers will be reflected at the tills.
Some retailers immediately indicated an intent to reduce prices, but others stopped short of making that commitment.
Prentice Panton, owner of Reflections and Liquor for Less, said many businesses are struggling to stay afloat and need the tax relief just to survive. He said the cut essentially rolls back a 2 percent tax increase from 2010 and is unlikely to have a significant effect on prices.
Fosters Food Fair announced that it would pass on all savings from the tax cut to customers. Woody Foster, who runs the supermarket chain, said most grocery items are affected by the cut and will be reduced in price accordingly.
But he acknowledged the tax cut is unlikely to make a significant difference, amounting to an estimated $2 on a $100 weekly shopping bill.
Residents can expect to see a larger cut in their power bills due to the fuel duty decrease. CUC is legally obligated to pass on the cost saving to consumers, something that the government said would save householders 4.3 percent on their monthly bills. That equates to a reduction of $21.50 on a $500 monthly bill or $10.75 on a $250 power bill.
Mr. Panton said both the cut in electricity prices and the 2 percent shaved from the duty rate will also make a difference to the cost of doing business.
But he said the cuts are not large enough to substantially affect prices.
Import duty was increased by 2 percent across the board in 2010, ostensibly to help fund garbage collection.
Mr. Panton said the cut in this year’s budget amounts to a partial removal of that earlier increase. But he said other costs, including work permits, had continued to creep up.
“I’m happy there are no new increases, but if what they are saying is correct and they have a $100 million surplus, then they are still taxing us too much.
“We will try to pass on some of the savings, but with all the other fees they have, the work permits and everything else, a lot of companies are barely profitable.
“The light bill will make a difference. The additional profit could go back into investing in the business and creating jobs.”
He said he would like to see a broader reform of import duty to simplify the system and cut costs more dramatically for retailers.
He added that improved enforcement against duty dodging would also help level the playing field for struggling businesses, which he said are competing against black market importers and stores in the U.S. that are not subject to the same taxes.
David Kirkaldy, president of Massive Equipment Rental & Sales and a past president of the Chamber of Commerce, said the budget announcements were a step in the right direction.
“It is a good start to combat the disparity between local businesses that pay government fees and employ staff, yet until now face the same duty costs as an unlicensed individual who could bring in any quantity of goods that often would end up in resale operations.”
But he said a more significant cut of around 5 percent applied to all items brought in for licensed business, rather than just retail, would have made a bigger impact.
In his budget statement on Monday, Finance Minister Marco Archer suggested the loss in revenues – roughly $4 million from the import duty cut and around $8.4 million from the fuel duty cut – would be offset by the benefit to the economy from the additional consumer spending that would result.
“The economic impact of this measure is expected to outweigh any financial loss to the government because of the multiplier effect,” Mr. Archer said. ”By reducing the above mentioned import duty rates, we are lowering the cost of doing business and expect that retailers and service providers will be able to pass these savings on to their customers, thereby lowering the cost of living and increasing aggregate output through demand for goods and services.”