Recession-hit businessman says sin tax increase is an added blow
Yesterday's increases in sin taxes were an added blow to one retailer already reeling from the effects of the recession.
Roderick Nesbitt said he's seen more than half his sales at Court Street Liquors disappear. The ten percent rise on alcohol and cigarettes are “definitely going to have an impact”, he said.
“Traditionally when things get tough, they turn to sin taxes as they call it,” Mr Nesbitt said. “There's not much you can do about it.”
However, for struggling retailers and those on Court Street in particular, “times right now are very tough”.
“I don't think it will be too significant [an impact]. Some people quit cigarettes when the price goes up but then they start again.
“Contrary to popular myth, people have to pay rent and electricity. If they were buying six beers before, they tend to buy three.”
Mr Nesbitt said he didn't plan on raising his prices until his old stock was sold off.
“I don't have a lot of stock, though, so it's easy for me to wait until the end of the week. When I get my next invoice I will raise it by A, B or C. For people with a big inventory, I would hope they wouldn't but it's entirely up to them.”
Bristol Cellars spokesman Kevin Green said the company was in the process of calculating its new liquor prices.
“[The increase] didn't come as a surprise. We expected it a few years ago, to be honest,” he said.
“The impact remains to be seen. Where it will have an impact will be on the competition between certain brands. This is a chance to think about the restructuring of prices overall.”
He continued: “How this affects prices in restaurants and bars also remains to be seen.”
John Tomlinson, president and CEO of tobacco importers Pitt and Company Ltd, said the duty increase brought on by the February Budget wasn't unexpected.
“It's normal for governments in hard times to levy the so-called sin taxes. There will be an impact, up to a point, but people generally get used to it and accept it. It's par for the course. It's consistent with other countries as well. There have been years when there was no increase on tobacco, but when increases come they are thick and fast. Overall, generally, the increases are higher than on other categories of goods.”
Retailers with goods already on their shelves haven't yet paid the new customs duty, he pointed out.
“It will be up to them whether or not they raise them to the new prices.”
Said Gosling's Ltd vice-president and managing director Charles Gosling: “It was no surprise and yet it was a surprise.
“In this year's Budget, the Minister said that he was increasing the taxes on both alcohol and tobacco to raise about $2 million in new revenues. Since the duty raised on both is over $30 million, I was expecting a raise of six to eight percent, rather than the ten percent.
“I am hoping that this will not have an impact on our business. Despite what the Department of Statistics says, ourselves and our largest competitor have had a decline in business in all segments since 2008. Essentially, as Bermuda's gross domestic product has fallen, so has ours. We are optimistic with tourism due to the improved US economy and hope those numbers will create an improved economy all the way around.”
Mr Gosling continued: “Still, with the duty having increased on tobacco and alcohol, the only impact it has had at Bermuda Duty Free at the LF Wade International Airport is to make our savings a further ten percent better — both for arrivals and departures.”
A carton of duty-free cigarettes costs just over half what it does on local shelves, he said.
The “sin tax” on tobacco and liquor went into quick effect yesterday with some retailers immediately upping their prices.
One woman told
The Royal Gazette: “I just bought a couple of cartons, and they changed [the price] already. It was like $88. I don't get it — I'm stunned. People have to have some sort of habit; mine just happens to be legal.”
A carton of cigarettes cost $40 before yesterday's rise.
The woman added: “I came back to Bermuda almost four years ago and prices have been steadily rising. It used to be around $7.25 for a pack and in that time it went up by $2. Government can't justify that much by saying they're broke — not to me.”
Hamilton car washer Denton Parris said washers might have to raise their prices as a result.
Resigned to smoking rolling tobacco because cigarettes are so costly, Mr Parris said: “It's terrible on us. Everything is going up. Things are already tight enough. We charge around $25 or $20 a job. I guess we should go up by ten percent then.”
Said Tourism Board member Maxwell Burgess: “My only real concern would be that we try to make sure we don't raise the tax to the extent that it affects the ailing pillar of our economy — tourism. If we drive that cost up, it could be retrogressive. An old friend of mine once told me ten percent of a dollar is ten cents, but 100 percent of nothing is nothing.
“If we cause a consumption decrease, the net effect of the tax is a decrease as well.”
Tiler and entrepreneur Amon Brown, of Somerset, said: “They're trying to collect more Government money. I'm not surprised. Everything goes up besides wages. But technically it could have an impact on everybody's life. People who are hit will raise their prices.”
Architect Harrison Isaac said he doesn't smoke or drink but agreed: “It's unfortunate, because the impact will hit other things as well.”
Asked for her take on the increase, sales worker Jill O'Connor of Warwick said she'd listened to the Budget speech and followed Budget stories online.
“It doesn't surprise me. A sin tax is like a tax on a luxury. They're things that some people can do without. On the other hand, if there weren't people drinking and smoking, some people would be out of work. I guess the answer is moderation.”
Ms Connor acknowledged that she was neither a drinker nor a smoker.
As for the impact on tourism, she added: “I always think if you give the good service and people like the location, they'll still keep coming back.”
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