Consumer dollars are not stretching as far in this post-value added tax (VAT) increase economy, according to one economic stakeholder, who said while Bahamians are still spending, they are spending noticeably less.
Chairman of the Bahamas Chamber of Commerce and Employers’ Confederation (BCCEC) Mike Maura said the first three months under 12 percent VAT have proven difficult for the business community.
“The conversations I have been involved with I can tell you that there are many businesses that have seen a contraction in business and in revenue. They’ve also seen and experienced, which is interesting although it makes sense, they’ve experienced an increase in the number of sales transactions but each sales transaction from a dollar revenue standpoint is less,” he said in a recent interview with Guardian Business.
“So, people are having to make a purchase more often but the amount of money that they have available at any specific time perhaps is less or at least its buying power is less, and so they are actually making more purchases but each individual purchase is a smaller amount.”
This is despite the duty exemption on apparel for retailers that was implemented in tandem with the VAT increase, according to Maura.
“Many businesses, the majority of businesses I’m sure are taking advantage of that duty reduction on apparel or clothing, but at the same time what that’s doing is it’s helping them try to at least maintain sales volumes, recognizing that the VAT went up by 4.5 percent,” he said.
“So, what they’re finding, at least the businesses that I’ve talked to, businesses are having to spend more on marketing to build traffic because of the perception, well the reality that the 4.5 percent from a consumer perspective is making everything more expensive with the exception of breadbasket items.
“That benefit on the duty break is kind of helping to balance prices a bit so that at the end of the day the consumer isn’t feeling the full weight or the full impact of that 4.5 percent. We have a number of businesses that are basically promoting or advertising a pre-VAT price and a post-VAT price increase, and in many cases the prices are the same because some businesses are having to absorb it in order to maintain business volumes.”