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The Duty Changes Explained To Clear Doubts

There continues to be confusion as to when the new prices on goods, for which duty rates have changed in the 2016 National Budget, are applicable. The answer is simple
18 Nov 2015 11:19
The Duty Changes Explained To Clear Doubts
budget

There continues to be confusion as to when the new prices on goods, for which duty rates have changed in the 2016 National Budget, are applicable.
The answer is simple – the new duty rates apply from the Budget day.
The Fiji Revenue and Customs Authority, National Manger Policy, Fazrul Rahman during 2016 Budget lockup has clarified that new duty rates on imported items apply on goods arriving into the country after the midnight on November 5. Similarly, same date and time also applies on new excise duty rates applicable on locally manufactured goods such as alcohols and cigarettes.
“What this means to consumers? It generally means that the prices for old stock in shops should reflect pre-Budget duty rates,” Mr Rahman said.
“The old stocks had been subject to pre-2016 Budget excise duty rates and when these goods are sold to consumers, it should contain pre 2016 rates.
“It’s totally wrong and illegal to apply new rates on old stocks that has been cleared from excise factories prior to the Budget day.”
There has been rising claims that prices, in particular for cigarette and alcohol, have risen overnight when there was still old stock present in the inventory.
The excise factories are under Customs control as per Excise Act and Customs Officers, who are stationed at the factories enforces this Act.
Using the beer factory and cigarette factories as an example, Mr Rahman said when they manufacture their products, it has to be cleared by customs officers before the product leaves the factory for home consumption.
When goods (cleared before Budget day) are disposed in local markets by traders, there is no need to increase their price.
Every business will have an inventory turnover period, it will take some time for new stocks to appear on shop shelves.
There is always a risk of manipulation as some traders, in anticipation of increase duty rates, buy huge amounts of cigarettes and beer for the budget date and then profit through selling these stocks at high price.
Therefore, from November 6, all goods cleared from these points would be using the new duty price.
Monitoring
It is no doubt there are traders would hike the prices immediately after the budget announcement.
While some might be doing so unknowingly because of confusion, we do have amongst us those who do this deliberately to make extra cash at the expense of customers.
News flash! FRCA can always trace back trader’s inventories to see if the new duty had been paid on the stock or the old duty and whether the pricing was reflective of the duty paid.
Mr Rahman said: “We can do an audit and find out the details – the full trail of when it was purchased and acquired. Anyone who cheats will easily be caught.
“Tax laws require businesses to maintain adequate records including inventory valuation records.
“Even for income tax purposes, businesses have to maintain accurate records on inventory as this is reported in the balance sheet. We can always trace back with some verification of records and checking the entire supply chain of the product concerned.”
Based on experiences on previous Budget changes, Mr Rahman said there have been reports coming out that prices were inflated after the budget.
And even their investigations proved this was happening, which had necessitated appropriate action. As mentioned earlier, every business will have an inventory cycle where it will take time for new stocks appear on shop shelves.
The inventory management process typically involves a lead time to place an order and it takes a while for goods to arrive and to appear on shop shelves.
Therefore, it would not be possible for new prices to come into effect immediately after the budget is announced.

Price surveillance
FRCA will take an aggressive stance in its price surveillance works.
Armed with new penalty provisions and with increased cooperation with Consumer Council of Fiji and Commerce Commission, FRCA will police pricing trends across the country.
This is especially when the VAT rate reduction to nine per cent takes effect from January 1, 2016.
In parallel to VAT rate reduction, government has also reduced duty rates on several items. All these should culminate into reduced prices.
The economic conditions such as exchange rates, freight charges and other routine costs are fairly stable and given this stability, the price should reduce when VAT is reduced from 15% to 9%.
Prior to the 2016 Budget, a lot of pricing data from several stores has been collected across the country and there will continuous and consistent monitoring.
All complaints received will be thoroughly investigated and fines will be imposed consistent with legislative provisions. The 2016 Budget has proposed stringent penalties.
So on one hand, FRCA takes immediate action to verify details if a complaint is lodged and secondly, there will be continuous price monitoring.
And the best thing about this price surveillance is that traders are not even aware of who is doing price checks and when this done. FRCA officers will to do surprise checks and maintain database of prices, which will be fed in the system for analysis.
Before the 2016 budget, there was price surveillance committee where exchange of information between Ministry of Finance, FRCA and Commerce Commission were taking place.
The good thing about 2016 Budget is that it has introduced penalty provisions. Therefore, FRCA is checking prices in the market at this point in time.

Complaint and fine
Consumers who feel there is something wrong with the pricing mechanisms, can always lodge their complaints with FRCA.
Or alternatively, the Consumer Council of Fiji is another body that is earmarked to do price surveillance and complaints can also be lodged with them.
A legislation will be introduced to ensure those who fail to comply with price reductions are punished.
Mr Rahman said non-reduction in prices due to tax and duty reductions are punishable by a penalty of $50,000 and upon conviction to a fine up to $100,000 or five years imprisonment.
So for traders who are in non-compliance phase, it is better to start complying or else face the huge fine or worse still, imprisonment.

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