Shipping challenges, not VAT causing increases – Minister

A NUMBER of measures are expected in the 2022 budget to cushion the impacts of inflationary pressures on those most vulnerable.

So says Minister of Finance, Camillo Gonsalves who spoke to SEARCHLIGHT during the luncheon period of debate on the 2022 Estimates of Income and Expenditure which were laid in the House of Parliament on Monday, December 13.

He said there are “various ways that we plan to assist the vulnerable population to deal with the problems related to Covid, the challenges related to the volcano, and any continuing challenges that vulnerable populations will feel from global inflationary pressures.”

The minister pointed to the global situation regarding the availability of goods due to covid-related challenges in the supply chain as being responsible for an increase in prices in St Vincent and the Grenadines (SVG), which is contributing to a hike in the cost of living.

Some shoppers have been complaining of an increase in the price of food items and goods in supermarkets and stores claiming that this is associated with an increase in the Value Added Tax (VAT).

The last VAT increase was by one percentage point on May 1, 2017, and the finance minister said it “has not contributed to the increase in prices. Similarly on the one-percent customs service charge, the New Democratic Party was advertising before it even came into effect that price increases were connected to it.”

He pointed out that the customs service charge came into effect and “there were no price increases that were appreciable.”

The rate of the VAT which was announced in the 2017 Budget Estimates and came into effect in May of that year saw that tax move from 15% to 16%.

During debate on that particular measure, prime minister Dr Ralph Gonsalves explained that the percentage point increase was a disaster levy to finance a contingency fund to help meet immediate finance emergency needs brought about by natural disasters.

“There is a one-percent charge on the Customs Service Charge that was applied to assist with the payment of fees to regional bodies.

There is an earlier one percent from many years ago that was placed on the VAT to help to put aside money for natural disasters to populate a contingency fund,” the finance minister reiterated.

Gonsalves added: “When people talk about the increase in prices at the supermarket or at the gas pump right now, and they mention either one of those one percents, the VAT issue which is the contingency fund money, or this customs service charge, that is the triumph of propaganda over facts.”

The Finance Minister pointed to the global phenomenon which has affected the availability of goods and prices, about which a number of regional and international heads of government have spoken.

He noted that there is a backup of ships off the Pacific coast of the USA awaiting clearance to dock and offload goods.

Added to this are the logistical challenges in the Panama Canal; the logistical nightmare in getting orders cleared out of China which has in itself caused a shortage of goods in certain parts of the world, and has customers waiting for their orders to reach them.

“This is a global phenomenon related to the Covid pandemic. It has nothing to do with any tax or charge fee that the government has implemented over the last two or three years,” the minister added.

“The fact of the matter is that a lot of people in the United States stayed home, started placing orders on Amazon.com, etc to buy things. They had extra money because they had received income support from the US government.”

The resulting increase in orders caused a boom in orders for goods from China. The cost of shipping increased, inclusive of containers, fuel, all of which forced an increase in the price of goods globally, he explained.

“These are the things if people look outside of their immediate world and see what’s going on about the increase in prices; this is a global challenge. This is a global problem. We are aware of it but St. Vincent and the Grenadines cannot make containers cheaper, cannot make fuel cheaper, cannot make products coming out of China cheaper.

“We recognise that there are some inflationary pressures, and the government is going to try to address that not in a blanket way, but by helping those people who are most vulnerable, who are most affected by this problem”, the minister added.

He said if people are going to blame the one percent VAT increase that was implemented years ago or even the customs service charge “which cannot raise a case of chicken by more than 50 – 60 cents, it is an unfortunate triumph of propaganda over facts”.

According to Gonsalves, the “opposition goes around every day saying-and they have advertisements on the Internet- saying prices are going up because of Ralph and Camillo.

“Then people see prices going up and say it must be because of Ralph and Camillo. But the fact of the matter is that this is a global challenge, it requires global solutions, and not petty politics.”