Grocers 'relieved' at food item exemption reversal

Thu, Jul 24th 2014, 12:09 AM

A major shift by the government to no longer exempt any food items in newly-tabled value-added tax legislation was welcomed by the head of the Retail Grocers Association (RGA), who expressed his pleasure that the government had "seen the wisdom" in the association's position.
Philip Beneby, president of the RGA, said of the elimination of the "VAT exempt" items from the legislation: "It will make it simpler and easier for the food industry, and I am happy they have seen the wisdom in that, because we were the ones who were going to be affected the most in that regard."
The decision by the government to include a lengthy list of exempted food items in previously released VAT legislation had raised the ire of the RGA, which said that it threatened the viability of many grocery stores and could ultimately lead to higher prices on non-exempt items, given the requirement of not being able to reclaim expenses related to sales of non-exempt items. "That's one of the components that had the grocers association kind of in a little tangle with the government. This is something that we have been putting forth to the government right from the outset: why have any exempt food items, because there's no country that has VAT with food items exempt? And of course the experts from New Zealand told them the same thing.
"It took the advice from the outside for them to listen, because we said that to them a long time ago, but be that as it may, it's a relief," said Beneby.
Speaking when he tabled the VAT Bill in Parliament yesterday, along with a Tariff Amendment Bill that will reduce duty rates on relatively small selection of just over 100 items, Minister of State for Finance Michael Halkitis noted the influence of New Zealand tax experts, Dr. Don Brash and John Shewan, on the final form of the VAT legislation. Shewan and Brash had recommended a "lower rate, fewer exemptions" VAT model, as in New Zealand, to reduce compliance costs and gain private sector buy-in. In particular, they had questioned the wisdom of such a lengthy list of exempted food items.
While the government initially suggested it had exempted these goods in order to alleviate the impact of VAT on the poor, Halkitis yesterday confirmed that it will instead seek to do this via cash transfers to low income individuals.

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