Dear Editor,
The Finance Minister on the TV programme, ‘Budget in Focus’, December 1, stated that the movement of a range of household items from a zero rating to exempt status would reduce the price charged to consumers.
This is manifestly untrue. When zero rated, no VAT is charged, and the manufacturer can claim back any VAT paid on production, thereby giving a completely tax free product. Exempt items include VAT paid on the production of the product, which therefore does carry a higher price than a zero rated item. Thereby the VAT authority receives additional revenue.
The list of exempt items is long, and these are largely basic household items which are a large part of the household budget, and this will impact on the poorer households.
Of course, the compilers of the budget knew that there was a hidden tax element in exempt items and therefore the sole reason for transferring from zero rated is to increase the tax yield. What other reason could there be in making this change? So the Minister of Finance is not being honest when he claims that this will reduce the burden of taxation.
It is a concern that the zero rating of essential household goods has now been reversed, and the decision cloaked in deceit and misinformation.
Yours faithfully
Peter Douglas