The Tribune

By LEANDRA ROLLE

Tribune Chief Reporter

lrolle@tribunemedia.net

ECONOMIC Affairs Minister Michael Halkitis yesterday pushed back on criticism from the food retail sector over its VAT regime, stressing that merchants had ample time to make adjustments ahead of the next month’s VAT cut on unprepared food.

The Davis administration announced earlier this year that VAT on unprepared food will be reduced to zero from April 1.

However, food merchants have criticised the move, saying the new tax rules create a “workload” that makes timely and accurate VAT filings “impossible” to comply with.

They also argued that it would be far easier for the government to make uncooked foods ‘zero rated’, as opposed to VAT ‘exempt.’

Mr Halkitis, speaking in the Senate yesterday, explained the reasoning behind the decision.

“Importers do not pay VAT,” he said. “They do not pass any VAT on to consumers, but they also cannot claim VAT input on those things that are not being charged VAT. In the case of zero rating, no VAT is charged, but importers and wholesalers, retailers, etc, can claim a VAT input credit.

“And so what happens is the government is then put in a position where they're paying refunds out to these large wholesalers and retailers, etc, and so we opted no VAT. The import is not being charged VAT and so the consumer is not being charged VAT but they will also not be able to apply any input credit to those exempt items.”

On the timing of the exemptions, Mr Halkitis said the government signalled its direction to retailers last year, even before the annopuncement was made in January, adding that they had sufficient time to prepare.

“We think that three months is ample time in this age of technology and AI etc,” he said, adding that the government expected a smooth adjustment to the VAT changes and pushed back against claims that the latest relief measure was an election ploy.

He insisted the latest relief measures are not tied to any impending elections, but are part of a series of relief measures that began after the Davis administration assumed office.

He acknowledged that some had attempted to downplay the savings households would see, but said the amount depends on people’s spending patterns.

“Those people who buy more groceries, they would have greater savings. and people who tend to eat out more, they would not have as much, but it represents a saving,” he said.