While consumers may be looking forward to a cheaper grocery bill next month, Government is bracing for a $400 million loss with the removal of Value Added Tax from some 7,000 food items.
Trade and Industry Minister Vasant Bharath yesterday said while buyers could look forward to marked savings at the grocery after November 15, the Government was leveraging additional dividends on several State enterprises to cope with this new financial loss.
Finance Minister Larry Howai also said on Wednesday night that Government would forego $400 million in revenue with the temporary removal of VAT on food items from November 15.
He was speaking at the Ministry of Finance's post-budget forum at its Port of Spain office on Wednesday night.
Bharath said at yesterday's post-Cabinet press conference at the Office of the Prime Minister, St Clair: "We believe from our initial calculations that amounts to a reduction of approximately $400 million as far as revenue is concerned that we would have otherwise have earned from that VAT."
"It is quite a significant reduction that will redound to the people of Trinidad and Tobago," he added.
Bharath said several State enterprises were earmarked to share the burden of this loss, but only named the National Gas Company (NGC) and Petrotrin. The State already owes Petrotrin $7 billion in subsidy payments, while State-owned Trinidad and Tobago Electricity Commission owes NGC some $300 million.
With those State enterprises already over-burdened, Bharath promised this would be a relatively short-term measure.
"It was always an interim measure, once we are able to control food inflation then we will re-look at the possibility of the reinstatement of VAT on those items," he said.
"But it is not likely to be in the near future," he added.
Some economists have argued that the removal of VAT may have the opposite effect on the food import bill, but Bharath did not share this view.
"In fact it will be lowering the food import bill by lowering it by 15 per cent. It's not going to add to the food import bill," he said.
With regards to the continued regulation and would-be profiteers taking advantage of consumers, Bharath said systems have already been put in place with the Prices Control Council. Bharath also now heads up a cross-ministerial team that has been mandated to regulate prices at the major grocery chains to ensure no retailer attempts to undermine the VAT removal. The group has already met with key stakeholders and will continue meeting until the implementation.
"We believe that the market itself with regulate where consumers will shop," he said.