Consumers' association vigilant for price abuse

As retailers prepare to mark up their prices by three percentage points in view of the hike in VAT, the Consumers' Association said yesterday it was determined to scan the market to cut down on abuse.

With just three days to go to the controversial tax hike, the GRTU, Association of General Retailers and Traders - which is against the VAT measure - wondered why the association had kept such a low profile about the matter when consumers would be suffering the brunt of it.

The widely unpopular increase comes into effect on Thursday as the government digs deep to tackle its budget deficit.

When contacted, the president of the Consumers' Association, Benny Borg Bonello said the organisation had remained tight-lipped because it did not normally associate itself with politically controversial issues. The association's main concerns, he said, were consumers' rights.

But this did not mean the association was in any way happy about the increase in VAT, especially since as a member of a sub-committee within the Malta Council for Economic and Social Development it had not even been consulted about the matter.

Mr Borg Bonello said he hoped that the three percentage point increase in VAT would translate into the equivalent increase in price - or less. "We will be on the alert to ensure this happens. It's a matter of wait and see."

It is not unusual for retailers to take the opportunity of a change in the taxation system to raise their prices disproportionately, as had happened when the former Labour government had replaced VAT with the Customs and Excise Tax.

Mr Borg Bonello urged consumers to inform the association should they notice any unjustified price increases.

He added that the increase in VAT did not necessarily all have to be transferred onto the consumer. "If there really is competition, then part of the impact of the increase can be shouldered by the retailers. Of course, if they act as a cartel, it won't."

Vince Farrugia, the GRTU's director general, said that profit margins for retailers were already very low and it was therefore evident that the increase in VAT would be fully absorbed by the consumer.

He said the GRTU was still prepared to take some form of action in protest against the increase, yet it would only make sense to team up with the consumers' representative.

"If consumers have not protested, why should we stick out our necks," he asked.

Mr Farrugia explained that many retailers would not manage to alter their prices by Thursday. "You sometimes feel like you are banging your head against the wall. Every proposal we have made for an easier transition has been refused," he said.

The government had imposed the change at the worst possible time when many retailers were busy with sales and price adjustments from abroad, he said. The GRTU had suggested postponement to the end of January when business ebbs, but that was refused.

Retailers have been given a fortnight within which to adjust their fiscal cash registers but, Mr Farrugia said, that concession was not extended to the price tags. Inspectors could, theoretically, fine shop owners when the prices displayed on items were not the same as those charged at the cash point.

Shop owners have in fact been advised by the GRTU to display a notice to inform customers whether their prices have been adjusted or not.

Old prices would be adjusted at the cash point where the three percentage point increase would be charged.

All constituted bodies were dead set against the VAT hike, Mr Farrugia said, and yet the government had forged ahead with the increase. With declining GDP and excess output, the last thing the country needed was an increase in VAT, he added.

"When you hit consumption, you really are hitting below the belt. The government has really handled this issue in the crudest and most illogical of manners," Mr Farrugia lamented.