The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Super Value's owner yesterday predicted that the supermarket chain's VAT take will be slashed by two-thirds once the "breadbasket" food exemptions take effect on August 1.

Rupert Roberts, pictured, told Tribune Business that the government will have to earn its forecast $400m increase in VAT revenues from industries other than food retail, suggesting it was unaware just how much of the sector's inventory fell into the soon-to-be "zero rated" breadbasket category.

He revealed that at least 50 percent of Super Value's product range would be VAT-free, and suggested this could apply to 100 percent of "Mom and Pop" food stores' inventory, given that they typically sold only "breadbasket" items.

Mr Roberts said his business had experienced a top-line decline similar to that of rival AML Foods, with Super Value's group-wide sales dropping by 5.7 percent in the week immediately following the 12 percent VAT's introduction.

This resulted in a 28 percent week-over-week decline in VAT collected on the government's behalf, but Mr Roberts told this newspaper he expected the supermarket chain's sales to increase - rather than decrease - once the "breadbasket" zero rating kicked in some 12 days from now.

He added that few consumers seemed to realise the magnitude of these potential savings, and suggested that the Government should have better protected its revenue base by not including so many "fancy" varieties within the 25 'breadbasket' categories.

Mr Roberts said "a couple of thousand items" will be VAT 'zero-rated' come August 1, including expensive varieties of cheese, rice and cooking oil, which he suggested did not merit inclusion.

Analysing the VAT change's immediate impact on Super Value's operations, Mr Roberts said some stores saw up to a 45 percent sales spike the day before the new rate's introduction, but this amounted to only an 8 percent increase for the full week.

"That week we took in $67,000 from VAT. That was the last week at 7.5 percent," he told Tribune Business. "The first week of 12 percent we took in $48,000 for VAT. I estimate that on the first week of the VAT exemptions, we'll take in $24,000 from VAT.

"We're only going to take in one-third of what we took in [monthly] years ago. I hope they're [the Government] making that up somewhere else. It's not going to come from the food retail industry."

The 2018-2019 Budget 'zero rated' so-called 'breadbasket' food items as one of the protections designed to insulate lower income Bahamians from the VAT increase's impact. This benefits both food stores and retailers, as neither will have to pay the new 12 per cent rate - the latter now being exempt from paying VAT on their input costs in proportion to the amount of inventory accounted for by 'breadbasket' items.

Mr Roberts, meanwhile, said Super Value's sales in the immediate aftermath of the VAT hike were "running" in line with AML Foods, having fallen almost 6 percent in the first week of July.

He, however, argued that this is unlikely to represent a long-term trend, with Super Value expecting sales to increase - not decrease - once consumers became alive to, and were able to access, the 'breadbasket' tax relief.

"I don't expect that to hold," he told Tribune Business of the first week post-VAT rise decline. "I expect that when the non-VATable items kick in there will be more sales. I don't expect a drop-off in sales. I expect sales to increase now that we're going to offer lower-cost food. I don't see why people people are going to hesitate to buy.

"On half of what we sell we're cutting the price by 7.5 percent, or 12 percent from this month. That's half of what we sell. The other half only goes up by 4.5 percentage points. The cost of living for the middle class and the masses has just gone down."

Mr Roberts continued: "It's really the people's time. The Government didn't sell it that way, and I don't know if they see it that way, because they don't realise the magnitude of 'breadbasket' items. They might have thought it was 5-6 percent, and don't know it's going to be 50 percent. All the 'Mom and Pops', all they sell is 'breadbasket' items so they won't bring in any VAT.

"If the Government intended to give people lower prices they've done it. If they intended to raise more revenue they're going to have to find it somewhere else."

Mr Roberts expressed doubt, though, that increased grocery sales would result in a matching rise in the sector's VAT contribution to the Government given the 'breadbasket' zero ratings.

"I don't know if selling it cheap we're going to get enough volume to get back up to what we were paying the Government at 7.5 percent," he added. "I hope so, but don't see it unless the economy picks up.

"There's really going to be a big drop in the cost of living on food come August 1. I don't think the public understand it. I never did understand the uproar, as the Government is giving this to all.

"I haven't heard a single person complain about 12 percent VAT, although breadbasket items have gone up 4.5 percentage points. No complaints. Consumers are bearing with it until August 1."

Mr Roberts said Super Value was planning to adjust to the 'breadbasket' VAT zero ratings by introducing two symbols on its scanners and computers; 'F' for VAT-free foods, and 'TF' standing for 'taxed food'.

"I think we're going to have to start with half of the tape being 'F'," he added. "That is not our biggest problem. There are about 25 categories that are bread basket commodities representing a couple thousand items."

Mr Roberts suggested there were too many product varieties, including specialist and "fancy" lines, included in the 'breadbasket' definition. He cited peanut and almond oil, as opposed to standard cooking oil, as products that should not be categorised as such. The same applied to grated and block cheese, and "fancy rice", all of which are now VAT-free.

"The 'breadbasket' item list is just oversaturated with fancy items in these commodities," he told Tribune Business. "Asking the Government, they said it was tied into these new Customs codes and they can't do anything about it until next year.

"I'm sure if the Government had realised they were there, they would have eliminated them and taken them out. I don't think wild rice should be a 'breadbasket' item, but they're all there, and that's where they're not going to collect VAT on."

Mr Roberts said computer technicians working for Super Value and other foods store chains now have "the tedious job" of inputting these several thousand 'breadbasket' items so that the overnight transition from 12 percent to VAT-free is seamless.

He urged the Government to show leniency to retailers if there were any glitches come August 1.