Just the Facts: Will GST Cause Prices of Goods and Services to Increase or Decrease?

The content originally appeared on: The Anguillian Newspaper

With the implementation of the goods and services tax on the horizon, to come into force on July 1, 2022, upcoming, there is much debate on whether or not merchants and other providers of goods and services will actually pass on the increase to the consumer. This issue was raised on the radio programme “Just the Facts” on Monday, February 14, and hosts Cora Richardson-Hodge and Jose Vanterpool considered the matter to be a very confusing one.

Mr. Vanterpool sparked the discussion by reading the following statement made by Premier Ellis L. Webster in the February 11 issue of The Anguillian, under the caption “Who Will Actually Pay It”. Premier Webster’s statement reads: “In terms of whether it should increase the cost of goods, we have always said that it shouldn’t, because the amount that businesses pay for GST (13%) is refundable. Therefore, it should not be passed on to the consumers.”
As soon as Mr. Vanterpool had read that passage, Mrs. Richardson-Hodge quickly picked up on it and said: “Let’s stop there and assess. That sentence essentially states that the Premier, the Minister of Finance, is saying that the 13% which the businesses would pay is refundable to the business, and therefore it should not be passed on to consumers…”
“Yes,” said Mr. Vanterpool, “to be honest, this statement is rather confusing. In a recent interview with Mr. Steven Seligman on Upbeat Radio, the Premier was heard saying that GST would result in a small increase, but it is not the 13% increase that people are saying it would be. It would be more like a 4% increase, seeing that IGT is currently at 9% and GST will take the tax up to 13%, then the consumer would be required to pay the additional 4% increase. A 4% increase is understandable, as opposed to thinking that prices would go up by the entire 13%. But to say that it shouldn’t be passed on is confusing.”

Mr. Vanterpool went on by making reference to another interview that the Premier had lately in which he made reference to podcaster Mervin Hanley’s views: “Mr. Hanley said on Klass FM that the implementation of GST will, in fact, result in prices being lowered, as opposed to being increased, since businesses would be able to reclaim the 13% as a refund.

“Mr. Hanley’s statements caused a long and controversial debate. Mr. Pat Mardenborough called in to give his views as to why the tax will cause increases on goods and services and not decreases. So, all in all, there are conflicting views on GST. One minute people have the notion that GST will not result in any increased costs. The next moment you hear that there will be a 4% increase. Then, on the other hand, you are hearing that GST will actually bring down costs. But personally, I don’t see how that is possible. From my understanding, there must be an increase in costs.”
Mrs. Richardson-Hodge reasoned: “The statement by the Premier that the increases should not be passed on to consumers does not make any sense. If you look at it, logically, when the goods come in to Anguilla and the business people pay their 13%, and after the goods are sold, the businesses get back the 13% as a refund, then where is the revenue for the Government that was intended to be collected through the implementation of the GST? And, why would you give back out what you have gotten in? That wouldn’t make any sense.”
Mr. Vanterpool reflected on the fact that the GST is necessary to fill a gap of some $24 million dollars. So, if the GST is not to be passed on to consumers, who will be paying in to fill the $24 million dollar gap — the businesses?