Rico’s TICO BULL – My very first VAT. Let me explain. In my business of private transportation, I often rent vehicles to meet the demand and needs of customers. With the introduction of the Value Added Tax (VAT), I knew that come next month my expenses would increase.
It is one thing to write about how on July 1 the VAT goes into effect, discuss among friends how we will al be affected, but another seeing it in black and white, on my reservation receipt for my first rental next month.
The US$80 – the 13% tax on the six-day rental for an SUV – may not be a big number in the scheme of things, but when combined that I will have to eat the 13% tax that I would have to charge my client, the double whammy.
Yes, the VAT is to be paid by the customer, the purchaser of services. But try to explain that to the customer that the final cost is now X when I have always charged Y. And how will future customers react to the increase?
One of the aspects of my business is applying the ‘all-inclusive’ rate, that is the customer is quoted a rate that includes items such as fuel surcharges, tolls, parking and so on. Taxes was not one of the ‘included’, not required up to and including June 30, 2019.
So, I can foresee the customer’s reaction, “say what? How much? We’ll have to rethink that.”
And I am not alone. The added cost has to be either passed on or eaten by the supplier. No in between.
In my case, my average monthly vehicle rental has been about US$900 in the past year. Starting next month, my costs just went up US$117 just on vehicle rentals, and not including all the other added direct costs such as legal and accounting fees, repairs and service fees to the vehicles, and so many others that I can’t even count right now.
Maybe things will change as we move forward with this assinine (misspelled on purpose) tax regiment. But I doubt it.
I, we, can only hope that appeals against the tax law start pouring into the Constitutional Court and the government will have no choice to either repeal (I doubt it) or amend the tax law to soften the blow.
As I said before, it wasn’t until I saw the item in my reservation quote that it hit home. What a powerful and unpleasant effect!