In recent weeks there has been a series of charges leveled against the business community of price gouging and using the VAT increase as a cover for extravagant price increases. As usual, the outcry is supported mainly by emotional political demagoguery and flawed research in the media. In all, it reflects an anti business ethos in the community and a desire to deflect the blame of significant price increases on to corporate Barbados.
There is no doubt that we have all experienced increases at the checkout counters of the supermarkets in recent months but there are several reasons for this that are beyond the control of the business community. The global rise in consumption and adverse weather phenomena that has created havoc with the production of crops has created significant shortages that have resulted in increased prices.
In the past six months the price of corn has nearly doubled, wheat has increased by 60 percent, sugar has more than doubled and the price of Soybean is 60 percent higher. All of these primary product price increases have and will continue to cascade through the food chain as animal and poultry feeds increase in price and we will see a steadily rising cost of food products beyond what we are experiencing at the present time.
Underlying the food price increase is the gradual increase in the price of oil that has tripled over the past two years. This has increased the cost of transportation and the energy inputs to processing food.
Thus far, most of the price increases have been gradual. In some instances, astute forward purchasing has protected consumers from any price increase but there is a limit to that protection unless commodity prices recede.
There have been some dramatic price increases in some items however such as pie fillings, strip loin beef and liquid shortening that have been reclassified by customs officials so that they fall under different tariff headings resulting in large increases of import duty. This can be viewed as a stealth tax increase that is not visible to the consumer and gives the impression of ad hoc or random price increases by the retailer.
In the case of pie filling the duty rate has changed from 20 percent to 140 percent. Thus a can of apple pie filling whose landed cost was $10 would have a duty paid VAT inclusive cost of $13.80 before the last budget and a duty paid VAT inclusive cost of $28.20 after the reclassification and the VAT increase a massive 204 percent increase in cost without adding any value to the transaction. In a similar vein any beef that has the word “loin” in its descriptive name, such as sirloin or strip loin has now moved from no import duty to an import duty of 40 percent. Liquid shortening also experienced an exceptionally large import duty increase.
Rather than seeking to delve into the facts of the matter, some elements of the press have joined the hue and cry against the Barbadian business community by publishing a survey of regional prices showing that Barbadian supermarket prices on 5 items were higher than those in other regional markets. This was a classic presentation of raw data that was in one instance skewed so remarkably that the text of the article refuted the tabulation above it in the case of boneless stew beef. The tabulation compared the price of boneless stew beef in Barbados with bone in stew beef in Trinidad and Jamaica. Only in the text did one realize that boneless stew beef was actually cheaper in Barbados than the other two countries. In addition no mention was made of other cost factors of the retail operations such as employee cost which is significantly higher in Barbados.
The fact of the matter is that it is government that is pushing its hand further into our pockets while deflecting the blame onto the business community.
phillip.goddard@braggadax.com
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