Heavier taxes begin to bite already burdened lives
With the VAT in place, even the water tariff would increase by 3%, therefore our costs have increased and sales have dropped
A whole host of price increases began to be felt all at the same time when the Value Added Tax (VAT) came into effect this year.
Charges for telephones, cooking gas, fuel and a range of goods fell within the tax increase.
People are adjusting rapidly to counter the increasing cost of living as a result of the VAT from Monday, January 1.
Many are choosing to eat home cooked meals and reduce dining out, cut down the use of mobile phones and the use of data.
State employee Vajira Perera, 55, who lives in a lodging house in Colombo, has stopped dining at eateries and pastry shops.
He said that he started to cook meals with two curries at his lodging by using an induction cooker as gas prices are too high.
Private sector employees say salaries have not risen.
U.D Wimalaratne, a 63-year-old security guard who works at a Wellampitiya private company said that the salary is not enough to fend for his family. He added that the cost of goods and transport have increased.
A bigger portion of the salary is spent on food when in Colombo, he said.
Operators of eateries, bakeries and canteens said they are forced to increase their service charges as well as prices, but they fear the loss of customers.
Harshani Wanniarchchi, 48, owner of a café within the Metro complex at Kompannavidiya said that a few measures have been taken to reduce electricity use. Air conditioners are switched off when there are no customers and snacks are preheated on request only.
“With the VAT in place, even the water tariff would increase by 3%, therefore our costs have increased and sales have dropped,” she said.
The purchasing power has declined and some buy just one item of fast food for children, or have one beverage, she said.
Bakers said revised prices of gas prices, wheat flour and a possible increase in electricity could further add to their costs.
A manager of a bakery at Kompannavidiya, A Nadarajan, 75, told the Sunday Times that they are waiting for the Bakery Owners Association to increase prices.
He explained that bakery product prices will have to be revised by at least 10% to compensate for higher gas price, water tariffs, and labour costs.
If the bakers decide to raise prices, prices of buns and snacks would be increased by Rs 10, he said.
Bakery owners group president N.K Jayawardena said there are no plants to raise prices because it would affect sales.
He said that three-wheel mobile bakery vendors, or “Choon pan” sellers have declined.
The stationary and communications services operators are hit by taxes along with stationery retailers.
Sashikala Natarajah, 51, said that the price of an 80-page copy book which was sold for Rs 80 is now Rs 160.
“Even the book prices are high, VAT had made its impact on mobile phone cards and data cards. Only the high price data cards are available,” she said.
She said that the Rs 59 data cards are not available and there are only 119 data cards available in her shop.
Transport providers, too, said that they are heavily affected. Ceylon Petroleum Corporation (CEYPETCO) and Lanka Indian Oil Corporation (IOC) increased the price of petrol octane 92 by Rs 20 while octane 95 was increased by Rs 38. Auto diesel was also increased by Rs. 29 and super diesel was increased by Rs. 41. Sinopec lowered prices slightly.
Lorry drivers who were loading goods from the Fort to be distributed in the provinces said hires have dropped and most shops in the provinces have closed.
Lorry driver V.K Jinasena said that he would usually stay a week in Colombo until his lorry is stocked but now he would only stay for two days as food prices have increased.
“I spend over Rs 1,500 per day only for meals, but I am never full as portions are smaller. It is not easy to stay in Colombo with the rising cost of food.”
He said fuel and spare parts are costlier, so charges have to be increased but he cannot do so for fear of fewer hires.
Transport providers such as three-wheel drivers charged an extra Rs 20 per kilometre, while they can run 27km from a litre of petrol.
They lamented that they have to brave the lack of hires to make a living. Three-wheel driver Lal Perera, 54, said that the increase in fuel prices has directly impacted the hires.
“I have to provide for my family by using the three wheels I bought by financing, as I was unable to pay the finance for months. I fear they will seize my vehicle.’’
However, the Government is addressing the impact of the VAT revision, Tax Policy Adviser at the Ministry of Finance, Thanuja Perera, said.
She added that this move would eliminate the additional taxes on goods and services under VAT and help implementation of tax adjustments.
Ms Perera said even individuals with expertise in economics are circulating a misconception.
She said that nearly 90 types of items, including educational services, electricity, health, medicine, passenger transport, as well as all vegetables and fruits, are exempt from VAT. Additionally, VAT does not apply to 65 types of items subject to the Special Commodity Levy.