Keeping consumers afloat

01/10/2013 10:36

 An Impassioned plea from the Consumer Watchdog

“It is our plea to the Government to put consumers at the heart of  its  economic policies to tackle the rising cost of living and to support growth and prosperity in the country.”

Times are challenging.

And, to cope in the competitive world we are living in today with rising cost of living, as consumers, we have to become more responsible, assertive and conscious.

Not everyone can walk into a supermarket and afford a full trolley of groceries –   some who used to buy three tins of fish in a week once upon time now can afford only one tin. Then, there are some who no longer enjoy the financial capacity to include ghee or milk on their shopping list.

This is all part of reality of life for many people today.

The Consumer Council of Fiji, being a consumer watchdog has the legal duty to ensure that the most disadvantaged and poor consumers are not marginalized by economic policies.

And, as a statutory body established under the Consumer Council of Fiji Act 1976, the Council is mandated to represent consumers’ views, concerns and issues.

And with this duty, the Council is pleading the Government to consider the plight of the consumers. The Council views the Budget as an important event where budget announcement has positive or negative implications for consumers.

In formulating the 2014 National Budget, the Council urges the Government to consider the increasing cost of living and how some mitigating actions can be undertaken to provide relief to the consumers. The Budget should provide relief to vulnerable Fijians by ensuring affordable prices of basic goods and services.

The Council calls on the Government to carefully scrutinize past budget policies relating to duty reductions on certain goods and whether consumers have benefitted through a reduction in retail prices.

Consumer spending is one of the principal drivers of the domestic economy as acknowledged by the Reserve Bank of Fiji. Policies should thus be geared towards facilitating consumer spending.

Government should also ensure that Fiji continues to develop its consumer protection regime through reforms in legislation, regulation and redress systems. Consumer protection is not anti-business, but a countermeasure against ‘bad business’.

The view that regulation in Fiji adds to the cost of doing business is weak and often promoted by those who stand to gain. Often regulation is needed because the businesses are not doing the right thing. For example duty reduction is not reflected in price drop. So who is gaining from duty reduction?

The Council has intimate knowledge and experience of the problems that consumers face in the market place as it is the main recipient of complaints and undertakes point of sale price surveys, product scrutiny, market surveillance and consumer research.

Some areas we have requested for consideration are:

1. Rising Cost of Living – Food Items

Food prices continue on an upward trend.

2010 vs. 2011

Price increase after VAT increase in 2011 - FMF Punjas Flour 4kg – 16.4%, Butter Rewa 500g – 14.1%, Punjas Soya Bean 750ml – 37.9%, Sugar 2kg – 121.6%, Canned fish 25.2%.

Between July 2012 and July 2013, a total of 9 items in the Council’s survey basket of 19 items have had price increases, 9 had price drops while 2 items remained the same.

2012 vs 2013

Increases: Rewa Butter by 18.8%, Rewa Life by 39.4%, Rewa Powdered Milk by 11.6%, Red Cow Powdered Milk by 38.8, Sunbell canned tuna by 31.3%, Potatoes by 1.46%, Corned beef by 3.4%, Corned mutton by 12.9%, tea leaves by 1.5%. The increases range from 1.5% to 39.4%.

Request:

The government to reconsider reducing or removing tariffs or import duties on essential food items particularly on powdered milk, liquid milk, butter where import duty stands at 32%.

Retain consumption tax but remove or reduce other tariffs. The consumption tax will help drive the economy as consumers would spend more if they are able to afford decent prices.

We believe that reducing or removing import duties on essential food items will assist Fiji’s compliance with WTO commitments on tariff reduction.

We have also requested for a reduction in the retail price of tinned fish.

2. Duty Reduction

Government should consider removing import duties on certain non food items but retain

consumption tax i.e. VAT. Fiji’s consumers are paying high prices for products such as

clothes and other personal items as VAT, fiscal and excise duties are added to the price.

Personal garments/clothes have fiscal duty of 32% plus 15% VAT. The high prices of

substandard new clothes are forcing consumers to opt for second-hand clothing. There is a

boom in second-hand clothing businesses in Fiji because consumers cannot afford new

clothes. Hygiene is a major concern for consumers of second-hand clothes as there is a lack of appropriate regulations to address health and safety issues.

Fiscal duty of 32% is still being charged on exercise books, note books, lecture pads and paper stationery which are essential for education and at work places.

Request:

Government to consider reducing the fiscal duty on:

  • Clothes
  • School stationery items - note books, exercise books, paper stationery, paper wallets,

            paper cards and other educational materials

  • Adult sanitary diapers to assist the elderly.

3. Duty Reduction not passed on to consumers

Any duty reduction on goods is seen as a relief to consumers. Traders normally approach government for duty reduction to express the benefits consumers will get from such reduction. However, it has been noted that traders generally do not pass benefits to consumers. This has been the practiced for years. Traders see duty reduction as extra profit which goes into their pocket. The outcome of this practice is that consumers continue to pay higher price while the Government loses out on revenue collection.

CCF finds no significant drop in smart phone prices despite zero-duty policy in the 2013 budget. A comparison of 2013 prices (April) of 87 smart phones with November 2012 prices found 71.3% of phones remained under pre-2012 prices while 12 smart phones (13.8%) increased in price. Council’s price monitoring concludes that Fijian consumers have not benefitted from the duty reduction and Government’s policy intention of increasing people’s access to the internet and online services.

Another example where duty reduction has had no positive impact was on vehicles under 2500cc where the Government reduced duty in 2011 from 32% to 15%.

Request:

Government should introduce mandatory price monitoring for items that have attracted

duty reductions or have become duty free. The Fiji Commerce Commission in collaboration with FRCA can be given the mandate to monitor prices and if duty reductions are not shown in retail price, it should intervene and set prices. This will ensure Government's duty reductions have real impact in terms of price drops for consumers. Harsh penalties on businesses that do not abide by price control orders on duty-reduced items.

4.  Duty on Energy Drinks

Duty can be used to modify consumption patterns. High duty and retail prices can be a

deterrent against consumption of unhealthy food products. Energy drinks linked to non-communicable diseases (heart problems, overweight, diabetes, gum diseases, sleep and

anxiety problems) are now becoming a major choice for young consumers. Drinks like

Monster, Red Bull and V contain high quantities of caffeine and sugar and currently incur

32% fiscal and 15% excise duty. Some energy drinks like PowerAde and Gatorade that used

to be confined to sports arenas are now commonly available as a snack drink. Energy drinks

often have a deceptive combination of soft drink and pseudo-nutritional supplement that may be susceptible to abuse.

Request:

 Government to increase duty on energy drinks. High prices should deter younger generation of drinkers and assist in controlling NCDs. Duty increase will give Government more revenue and offset our recommended duty reduction for essential food items.

5. Consumer Security Deposits

Consumers pay refundable deposits to service providers such as FEA, Water Authority, Vodafone, TFL, Connect, Digicel, etc. Service providers are holding on to millions of dollars of underutilized funds which is “dead money”. SDs are consumers’ money and therefore consumers must be protected.   

The Council’s research has revealed that 6 service providers kept the SDs in non-interest bearing bank accounts, while one service provide had the security deposits in a bank account that was earning interest. This service provider does not pass the interest earned to its customers. A good illustration of the staggering amount of SDs being utilized by these companies is in the case of FEA where in 2012, FEA held $34.3 million dollars in security deposits.

 Fiji is losing out in terms of the investment potential of such funds.

Request:

The Council is requesting Government to  set up an independent Securities Commission based on the model of Fiji Data Bureau to manage security deposits and later include rental bonds once the legislation is in place.  Deposits should be invested or utilized in a manner that would bring some returns to consumers, rather than being used by these companies to further their interests by utilizing public funds kept as SD. The idea is for these funds to generate interest which can be used by the government for public goods such as infrastructure or hospital improvement etc.  Consumers can also receive a portion of the interest when they decide to close their accounts.

Other areas in which the Council is proposing reviews and reforms include:

  •   Credit Card Levy and Stamp Duty
  •  Insurance
  • Privacy Laws and Protection of Consumers Financial Information
  • Pharmaceuticals – Remove Restrictions on Sale of Vitamins and Supplements
  • The Council’s 2014 budget submission to the Government  is based on the consumer sentiments  reflected through the  litany  of complaints  which the Council receives on  a regular basis.

It is our plea to the Government to  put consumers at the heart of  their economic policies to tackle the rising cost of living and to support growth and prosperity in the country.