In Vanuatu, the Price Control Act [CAP 86] was enacted in 1974 and its revised edition was published in 1988. The purpose of the Act was “To make provision for controlling the price of goods and services.”
This included provisions for establishing an independent Price Control Bureau, a Prices Advisory Committee, and a system of price control and inspection.
As the 2.5% increase in VAT is being implemented across Vanuatu, Consumer complaints are on the rise as retail prices increase.
We take a look at the problem presented as the Vanuatu Government has introduced a TAX but did not create a specific unit to oversee the that businesses fairly accommodate the new legislation.
This report is an extract from the Ombudsman investigations into the abolished Price Control Unit back in July 2010 and back then the aim of the investigation was also to determine whether the Act is defective.
A 2010 Ombudsman reports says ‘since the enactment of the Price Control Unit, the Government has in 1987 and 1988 made attempts to prescribe ceiling prices chargeable on certain goods such as rice, tinned mackerel, sugar, tobacco, corned beef, salt, cooking oil, tea, coffee, milo, milk (including the infant formula milk, Lactogen), washing powder, butter, margarine, biscuits, and flour.
A schedule was created to portray the maximum wholesale and retail prices chargeable and it was to be exhibited in every store or ship that operated as a wholesale trader or retailer.’
In 1988, a second attempt was also made to charge ceiling wholesale-retail prices on different tobacco brands.
In January 1995, the Honourable Minister of Home Affairs, Mr Serge Vohor (“Mr Vohor”) made an attempt to use his powers as Minister under Section 15 of the Price Control Act to make regulations for a Prices Advisory Committee as established by Section 6 of the Act.
The purpose of the committee was to act an advisor on all draft legislation regarding prices. To date, there is no longer such a Committee in existence.
In August 2006, the Ombudsman was informed that the Government Business Enterprise Unit in the Ministry of Finance was responsible for carrying out the functions of the Price Control Bureau. The Ombudsman then wrote a letter to Mr Thomson Pakoa (“Mr Pakoa”), the Government Business Enterprise Manager, to voice his concerns about the lack of price control on two particularly important commodities; infant formula milk (Lactogen) and one bale of sugar.
Following the Ombudsman’s letters, on 22 September 2006, Mr Pakoa wrote to stores in Port Vila and Luganville querying their pricing methods on sugar and Lactogen milk. Due to insufficient responses by Mr Pakoa, the Ombudsman then initiated an own motion investigation in October 2006 into the allegation that there was a lack of price control on goods and services in Vanuatu by the Price Control Bureau.
The Ombudsman sent letters to 19 traders in Port Vila and Luganville on the allegations being investigated. Appendix 7 is a summary of the questions and answers received by traders. 5.5 On 10 May 2007, the Ombudsman wrote to the Honourable Minister responsible for the Price Control Bureau, then Minister for Finance, Mr Willy Jimmy Tapanga Rarua (“Mr Tapanga Rarua”)
The Ombudsman requested that Mr Tapanga Rarua responds to the allegations regarding the alleged lack of price control on traders by the Ministry of Finance.
In his response dated 21 May 2007, Mr Tapanga Rarua responded that in the 1990s, the Price Control Unit was abolished.
In 2002, then Minister for Finance, Mr Joe Kalo attempted to resurrect the Price Control Bureau and the Government Business Enterprise Unit would assume the implementation of the Price Control Act. However, due to political instability, this did not eventuate. Further, due to ‘budget constraints, high turnover of Ministers in the Ministry and a lack of coordination with relevant stakeholders’, this Bureau has been left idle.
The Ombudsman findings then were “The Government through the Ministry of Finance has failed to implement the Price Control Act [CAP 86]” which never happened.
An extract from NOMAD CAPITALIST does indeed tell us the origins of the 15% Introductions and as explained ‘At least 80% of Vanuatu households spend the majority — if not all — of their income on imported goods; raising VAT would decrease the quality of life for a lot of people in Vanuatu.’
Since the 15% Tax was introduced, goods and service’s providers have all of a sudden decided to take advantage of the situation by adding 15% VAT onto the already existing 12.5% (instead of adding 2.5% onto the existing 12.5%) which now totals VAT charged for some goods and services at 27.5%.
The Vanuatu Government, however, does not have any mechanism in place to control the hiking prices being imposed as the ‘Price Control Unit’ was abolished in the late 90’s and fast-forwarding to 2017 when the 15% Tax was approved in Parliament, not one member of the 55 members of the Vanuatu Parliament ever thought about the importance of the ‘Price Control Unit’.
Retail Shops, Take Aways, Transport, and even farmers are have raised prices on local produce as a form of protest on the VAT increase.
An example is pricing from on shipping company who has been charging fare from Ambae to Vila at Vt7,500. The company is now charging the same destinations at Vt8,500, inclusive of VAT.
When we make the calculations it is quite alarming how the shipping company has adjusted its fares as If you remove VAT from Vt7,500 you get Vt6,667 and If you add the new VAT rate of 15℅ to Vt6,667 you get Vt7,667 and not Vt8,500 (Calculations courtesy of Ian Baltor.)
The Vanuatu Government though has some control measure in place but it is not enough nor effective given the price changes happened overnight and there was nothing the Vanuatu Government could do about it.
The Government did not empower themselves to have control over businesses in regards to the VAT increase, and yes it is possible to ask, how did this happen, given there are a lot of degree holders within the Vanuatu Parliament?
The Vanuatu Ombudsman Office in 2010 recommended that the ‘Government through the Ministry of Finance appoint a special task force to conduct a comprehensive review of the Price Control Act to bring it in line with the changing global economic trends and to also ensure that consumers and traders rights are protected.’
To date, we do know the recommendations were never done and the ‘Price Control Unit’ remained abolished in 2018 and even though there was a 2.5% increase in VAT from 12.% to 15%, the Government failed to provide basic awareness before the implementation of VAT started and also to assist businesses to how they must calculate the VAT increase.
The same composition of the Vanuatu Parliament, both on the Government side and the Opposition side, who debated the VAT increase, failed to address a lot of factors which were of importance, and even though the opposition raised some important element, they also failed to address the need for a ‘price Control Unit’ to oversee pricing issues as VAT is implemented.
The prices are soaring as businesses take advantage of the situation and it is the people of Vanuatu who are facing the consequences and until the ‘Price Control Unit’ is resurrected the whole country will witness phenomenal price hikes with Goods and Services.