Consumers must benefit from duty reductions

05/11/2013 16:14

The Consumer Council of Fiji is urging the Government to put in place strict price monitoring system particularly on duty reduced items announced during national budget to reflect lower prices at retail level.

A stringent system should be in place to monitor and ensure that once the Government reduces duty on certain items, the prices of those items go down, having a real impact in the life of an average consumer.

The Fiji Commerce Commission can work in collaboration with Fiji Revenue and Customs Authority to intervene and implement price control on products that have had duty reductions but where traders are failing to reduce retail prices.

There is also a need for harsh penalties on businesses that do not reduce retail prices on duty-reduced items to stop years of practice where retailers do not pass on the tax cut in full.

The Council’s plea comes in light of the upcoming 2014 National Budget announcement, scheduled for this Friday (8th November) - an event which the nation awaits, anticipating some form of gain.At the end of the day, consumers want more money in their pockets and affordable prices of goods and services to be able to battle the rising cost of living. This would also mean, more consumption tax (VAT) collection for the Government as consumers’ purchasing power would increase.

Traders normally approach government for duty reductions to express the benefits consumers will get from such reductions.However, the Council has noted that traders generally do not pass benefits to consumers through matching reductions in retail prices. This has been the practice for years.Traders see duty reduction as extra profit which goes into their pocket. The outcome of this practice is that consumers continue to pay higher price while the Government loses out on revenue collection.

For instance, the Council finds no significant drop in smart phone prices despite zero-duty announced in the 2013 national budget.

A comparison of 2013 prices (April) of 87 smart phones with November 2012 prices found a mere14.9% had dropped in price, 13.8% increased in price while 71.3% had no change in prices. Even for those that had dropped in price these were mainly low-end smart phones. Some pre-2010 model smart phones are still being sold at high prices despite new phones entering the marketing regularly.

Another example where duty reduction has had no positive impact was on vehicles under 2500cc where the Government reduced duty in 2011 from 32% to 15%.

Council’s price monitoring concludes that Fijian consumers have not benefitted from the duty reduction and Government’s policy intent is not achieved.