Fogarty's says it's 'absorbing VAT'
-- offering sales-reduced prices, other bargains
By Shirley Thomas
Guyana Chronicle
January 28, 2007
AMID misgivings and controversies over the implementation of the Value Added Tax (VAT) from January 1 this year, Fogarty’s, a branch of the Laparkan Group of Companies, says it has taken a decision to absorb VAT to ensure good deals for its customers.
Fogarty’s, a VAT registrant, is required to collect and remit VAT on taxable supplies sold, to the Guyana Revenue Authority (GRA).
Laparkan Managing Director, Mr. Vibert Parvattan said that as a corporate citizen which views very seriously its responsibility to both the GRA, and its customers, the management of Fogarty’s, while mandated to charging VAT on all taxable supplies, took a decision to cushion the effects of VAT on its customers, with the result that it is “literally absorbing VAT”.
The decision taken, he said, was to put systems in place to ensure consumers’ spending power allows them, when they go to Fogarty’s, to be able to shop comfortably, without the fear of taking home considerably fewer items than they would have, prior to January 1, for the same amount of money.
And incredibly, they have been able to work out sales discounts in such amounts that even where VAT is charged on taxable supplies, the final cost of the item to the customer is still either the same as it was before VAT was introduced, or even less.
Outlining the company’s approach to cushioning the effects of VAT to the customer, Parvattan explained: “In that regard, we reviewed the selling prices, and adjusted such prices to under/below, and in some cases the same as they were last year before VAT was implemented.”
The company, he said, found that by offering a 10 or 20 per cent discount on the price of some items, when the 16 per cent VAT is added, the final cost of the (taxable) item to the customer will still be less than what it would have been sold for before January 1.
Asked what would be his company’s projections with the state of affairs now being experienced, particularly in relation to a drop in shoppers, Parvattan said, “We expect that the current decline in traffic and sales will shortly improve.”
He said the way to go, for the time being, would be to offer sales–reduced prices, and other bargains and giveaways.
To this end, the company has embarked on a massive sale, offering between 10 and 20 per cent discounts on items on all three floors of its Water Street store – supermarket on the ground floor; ladies wear, household items and luggage, and office furniture and supplies on the second floor; and furniture on the upper floor.
However, items in the cafeteria remain at the same prices, and there has been no discount on the repair and servicing of computers and related supplies, Parvattan said.
In fact, he said, labour charges on repairs will now attract more.
And while there is expected to be a slight 10 per cent increase in the price of confectioneries on the ground floor, in the Office Equipment and Supplies Department the prices of Canon fax machines and photocopiers and Canon toners have been considerably reduced.
The sale is massive, and as attested to by customers interviewed, the benefits are good.
Citing the furniture department as a typical example, Parvattan affirmed: “Every piece of furniture now sells (including VAT charges) for below last year’s price.”
Of the supermarket he said: “All of our prices are the same (inclusive of VAT). The net result is that we have compromised our gross profit, and the company has been absorbing VAT.”
But it’s a ‘sale season’ and won’t run indefinitely and persons wishing to zero in on such bargains need to do so with all haste.
Asked how long the company would be able to carry this added financial burden, the Managing Director replied: “We see this as a temporary measure until many of the temporary teething problems would have been resolved and new prices on stocks kick in.”
He said this would demand buyers negotiating with suppliers for reduced prices although the full impact would necessitate all stakeholders working together, with the full understanding of operational issues.
But even in the face of reduced profits and a slower business turnover, the company has no plans to reduce its labour force, Parvattan said.
This will mean tighter controls, insistence on elimination of wastage and generally increased production and productivity.
Expressing his company’s position on this, Parvattan stated: “Historically, even in difficult times we have never retrenched. Managerially, we attempt to address such issues through increased efficiency. Laparkan’s culture and values dictate that we secure jobs for our staff.”
He conceded that so far as the administration of VAT is concerned, there is a level of misconception ‘out there’.
He is hopeful that given all the teething problems now being witnessed, a coordinated approach, along with adequate information and efficient dissemination will get going very soon, so that the consumer gets over the barrier of seeing a ‘direct tax’.