Barbadians will not enjoy a duty-free day this year and it seems they won’t have a VAT-free shopping day either.
The Barbados Chamber of Commerce & Industry (BCCI) said this week it was opposed to a duty-free day as it allowed only businesses with those facilities to benefit. Instead the chamber would prefer a national VAT-free day as this would be a win-win situation for all businesses and shoppers.
BCCI president Lalu Vaswani said the organization’s formal proposal to Government “for a national VAT-free day – for a single day and giving specific suggestions how to ensure that it operated in a transparent way and not be abused . . . was not successful”.
Many businesses here were looking forward to the duty-free tax day, and even more wanted the VAT-free day, to generate greater sales for Christmas – traditionally the period for their highest annual revenue. And this was even more anticipated this year as retailers islandwide are reporting reduced consumer spending, with few optimistic about significant increased sales this Christmas unless such an initiative was forthcoming.
A similar argument prompted the Antigua and Barbuda government to announce a two-day sales tax holiday this weekend. There, the sales tax will drop from 15 per cent to five per cent and will apply to all types of goods.
In the United States, where sales tax holidays started in 1997, each state waives sales taxes only on specific items and imposes varying limits on how much shoppers can spend tax-free on those items. This year, though, retailers were arguing for a relaxation of these constraints to boost flagging sales.
This year, 17 states had sales tax holidays in the weeks leading to back to school in September on everything from clothing to computers to backpacks. And the National Retail Federation (NRF) said the extra four to seven per cent savings would have helped to soften the after-effects of the average family’s expected splurge of US$688 (BDS$1 376) for the then approaching school year.
Rachelle Bernstein, vice-president and tax counsel at the NRF, said while the savings may be marginal, sales tax holidays drew big crowds.
A similar scenario was seen here last year. According to the BCCI, the spillover effect of the duty-free day in Bridgetown was a three-fold increase in the sales of non-duty free stores in some cases.
Clearly, to sustain businesses and employment, a vibrant level of economic activity is needed. The success of the proposed VAT-free day initiative would have undoubtedly provided this by encouraging more consumer spending.
The Government has to know this, but the fact it has not given the go-ahead for it may be due to concerns about revenue loss, among other factors.
For certain, the Minister of Finance has the authority to waive VAT for the day under the Duties, Taxes and Other Payments Exemptions Act, Cap 67B.
However, Government’s position could be influenced by research which states that sales tax holidays do not promote economic growth or significantly increase consumer purchases; rather, they shift the timing of purchases and some retailers raise prices and so reduce consumer savings.
Whatever Government’s arguments against it, with nine days to go before Christmas, many Barbadians and businesses alike would welcome one day of not having to pay the 17.5 per cent VAT on anything they buy.
