The Government has extended its Value Added Tax (VAT) concessions on a range of essential grocery items and building materials, but the Department of Consumer Affairs says it is closely monitoring retailers to ensure consumers receive the full benefit of the tax relief.
The department says it has intensified its price surveillance programme and is encouraging consumers to report businesses that fail to pass on the savings.
Director of Consumer Affairs Wendy Frederick, in a video release this week, said the department has been systematically collecting pricing data since the introduction of the VAT relief measures.
“As usual we have our complaints and investigation officers doing monitoring and surveillance and this has been from 2023 we have been capturing data,” Frederick said. “So we have prices before the implementation of the zero-rated VAT and after the implementation and we collect the data. Complaints and investigations officers, we monitor and compare prices before and after.”
Frederick explained that the zero-rated VAT regime differs significantly from VAT exemption because businesses are still able to recover input VAT paid on their purchases.
“The VAT-exempt businesses are not able to claim any input VAT. However, with the zero-rated VAT, the businesses are able to claim any input VAT that was incurred,” she said.
“Whereas at the border, both items are, you won’t get any VAT at the border. So this should have an impact on the reduction or the decrease in price, final price of the goods.”
She noted that the arrangement benefits not only consumers but also businesses.
“So this zero-rated VAT, not only benefits the consumer, but it also benefits the business as well,” Frederick said. “They’re able to claim, if it’s zero-rated, any input VAT.”
To determine whether retailers are appropriately reflecting the tax concessions in their pricing, the department analyses costs throughout the supply chain rather than relying solely on shelf prices.
“So we have data on the cost, the actual price of the item from the time it’s purchased until the time that it’s landed,” Frederick explained. “So all of that we’re able to monitor and compare the prices.”
The department also examines changes in supplier pricing, shipping costs and other import-related expenses before assessing whether any increase in retail prices is justified.
“We would have seen whether the prices may have increased from the supplier’s end. We’ve seen whether it may have decreased from the supplier’s end, increased or decreased from the supplier’s end, and also monitor the impact of the duties.”
“We have prices of the shipping cost. So we use all that information to establish,” she added.
The Department of Consumer Affairs is urging members of the public to remain vigilant and report any concerns if they believe retailers are not passing on the benefits of the Government’s VAT concessions.