Mobile Operators Playing up with VAT

18/01/2016 13:14

The Consumer Council of Fiji is appalled that Vodafone Fiji Limited (Vodafone) and Vodafone Reseller - Inkk Mobile Fiji have not reduced the prices of recharge cards, daily and weekly SMS Pass and internet daily, weekly and monthly data pass to reflect the reduction of VAT from 15% to 9%. The VIP prices for these products still remain the same when compared to last year.

For example: The current weekly SMS plan prices by both Vodafone and its reseller -Inkk are $5.99, which was the same before VAT reduction. Moreover, the popular day and weekly internet data passes for Vodafone remains at $1.99 and $5.99 respectively. Inkk, on the other hand, is also applying the same rate for its data day pass, which is $1.39.

Users of mobile services have raised their concerns with the Council on the pricing of the various plans by Vodafone and Inkk.

The Council has noted that the market leader Vodafone has increased the VAT Exclusive Price (VEP) on its recharge cards and then applied the new VAT rate to maintain the price of recharge cards.

The Council has evidences in the form of receipts from Vodafone where its prepay recharge cards 4 x $15 and 3 x $25 has the VEP price amounting to $117.39 last year. Upon an application of 15% VAT (old VAT rate) on this VEP value, the total amount charged was $135.00 with VAT component of $17.61. However, this year the VEP for the same valued recharge cards and the same number of cards has increased to $123.86. On this $123.86, the mobile company has applied 9% VAT thereby still charging customers a sum of $135.00 with a VAT of $11.14.

This is a case of VAT manipulation to ensure there is increase or no reduction in revenue collection by Vodafone and Inkk. Consumers did not gain in dollar terms as they are paying the same amount. Consumers simply expect reduction in price with reduction in VAT which did not occur at point of sale. After all VAT is applied at point of sale. However, what is more visible is an increase in revenue for Vodafone by changing the VEP from $117.39 to $123.86.

One would like to comprehend the rationale behind the increase in the VEP price by the service provider which defeats the purpose of the VAT reduction where consumers are not able to reap the benefit.

The Consumer Council commends Digicel Fiji, which has revised its rates for SMS and internet data pass to reflect the reduction of VAT from 15% to 9%. For Example:1. Day Pass: Consumers were paying $1.99 last year and now $1.892. SMS Pass: Consumers were paying $1.50 and now $1.403. Data Plan Weekly: Consumers were paying $5.99 and now $5.654. Total Freedom Weekly: Consumers were paying $4.99 and now $4.70.

However, Digicel failed to reduce the price or VAT component of recharge cards/Top up. For example Digicel Top-up for $20 in 2015 included a VAT of $2.22 which remains same for $2016. It is strange that VAT remains $2.22 for $20 top-up despite reduction of VAT by 6%.

Consumers are unable to comprehend the application of VAT by two mobile operators-Vodafone and Digicel on recharge/top up. Also consumers would like to know if Digicel can reduce the price of SMS and internet data pass then why Vodafone/Inkk did not do the same. It was expected for Inkk to follow Vodafone being Vodafone Reseller.

The Council had requested Vodafone, Inkk and Digicel to explain how prices have been adjusted on recharge cards to ensure consumers gain in terms of saving few dollars with reduced VAT. Only Digicel and Inkk responded.

The conduct of the mobile operators are unacceptable. The Council lodged a formal complaint with evidence to the Fiji Revenue and Customs Authority to ensure mobile operators pass on the benefits to the Fijian consumers or be subject to appropriate penalties imposed by the regulator.