Retailers drag heels on VAT relief measures
Pauline Dikuelo - Lesedi Mkhutshwa - Phatsimo Kapeng | Monday August 8, 2022 06:00
The measures, announced by government last week, kicked in on Wednesday and are due to run until January.
Under the measures, cooking oil and LPG gas have been zero rated for VAT, while VAT for all other commodities and services has been cut from 14% to 12%.
While major service entities such as the banking sector, Botswana Power Corporation, Multichoice and others announced reductions in prices to reflect the VAT reduction, Mmegi’s preliminary findings in Gaborone and Francistown found that prices of basic commodities in shops were did not reflect the relief measures.
In some instances, the base price of commodities in some shops appears to have been marked up to ensure that shop owners cash in despite the relief measures.
In both cities, shops have generally reduced the prices of cooking oil which has been zero rated, but have ignored other commodities.
“I usually buy my stock every month end because it is when we find more items in special but this time around I waited a little because I was hoping for better prices as was communicated by the government,” Masego Sekgabo told Mmegi in Gaborone. “Instead I found out that I was wasting my time. “I just left the shop right now and what I can say is that these people are just playing mind games because I came here expecting to see a huge difference from what we have been going through but unfortunately nothing has really changed.”
She added: “Batswana should open their eyes because most of us are suffering. We pay rent and bills together with transport and we can’t afford anything anymore.”
Moemedi Tsopalame told Mmegi that government would have to make follow-ups to ensure that the relief measures are having their desired impact.
“I have a strong belief that these shops have even increased their pricing because they know that Batswana are too ignorant,” he said. “We urge the government to send people in these shops to observe if they have indeed reduced their pricing. “The only thing they have reduced in many shops is the price of cooking oil because they know that it’s the one product that attracted the attention of many people when the prices were increased.”
Shop attendants who spoke to Mmegi said outside of cooking oil, the prices of other commodities had not been reduced even though the changes in VAT had been made.
In Francistown, food vendor, Onalenna Tsuonyanne, said the price of cooking oil had noticeably declined.
“I am happy that they reduced the cooking oil prices. “Since Wednesday business has improved and we made a massive profit in a day, unlike in the past where we were running at a loss. “We used to buy SunStar cooking oil at Jumbo Express wholesale for P77 each and now the price has reduced to P62.That is a massive difference of P15 and for that we are grateful.” “Business has been bad because customers were refusing to purchase our fresh chips complaining that the quantities were too little.”
Another street vendor, Sinah Setumbeko urged government to step up its effort in ensuring that the relief measures are implemented.
“My dear this is the joke of the year. I don’t understand what is going on because everything is still the same. “Some retail outlets have not changed their prices and in fact they have increased on some of the cooking oil brands,” she said.
Local tax expert, Jonathan Hore said the onus was on retailers to be ethical and pass on the relief measures to consumers.
“The public should expect to see the prices of goods going down and that basically means they would get some relief in terms of the financial impact,” he said. “Some may be tempted to increase profits by maintaining the prices as they were, which would defeat the whole purpose.”
Hore said it is important to understand the fact that the new 12% rate does not directly translate to the immediate abandonment of the old 14% rate for all affected commodities.
“The VAT laws provide that where movable goods are delivered by the supplier before the change in a VAT rate becomes effective, i.e. prior to 3 August 2022, the supplier is required to account for such sales using the 14% VAT rate. “Technically, this applies to supply or delivery of movable goods where the payment or invoice is expected to be received or issued on or after 3 August 2022,” he said.
Mmegi is informed that Finance Minister, Peggy Serame held a meeting last Friday with representatives of Business Botswana and other stakeholders in an effort to ensure that government’s interventions filter down to ordinary consumers.
Yesterday, Competition and Consumer Authority director of Investigations, Policy and Research, Ernest Bagopi told Mmegi that organisation would step up its monitoring activities in local shops to see whether the appropriate VAT rate was being charged and verify trends in pricing.
He said ordinarily, the Authority conducts its monitoring every month, but this would upgraded to ascertain whether the relief measures were being reflected in the prices obtaining in various establishments.
“Businesses operate under laws and what they have been told is that government wants to use all the instruments available to ensure that consumers benefit,” he said. “Those that don’t comply and where there is evidence, government will pull all the instruments that it has including around licensing. “We have historical records of prices from the shops that we monitor and going forward, we are looking at the VAT charged on the receipt and also the trend in prices before the inflation relief measures and after.”
Inflation reached a 14-year high of 12.7% in June, driven up by higher fuel and food prices. Most analysts expect inflation to peak at about 14% this year, before declining from next year.