Monday, 23 November 2020

Ticos say they will sacrifice fast food and beer because of the VAT

Jonathan Jiménez likes his beer. Every quincena (pay weekend) he spends between 20 and 30 ‘rojos” (20,000 and 30,000 colones) on his favorite beer, Imperial.

But this taxi driver told La Teja he accepts that the economic situation is tougher with the entry into force of the Value Added Tax (VAT) and that the will have to cut back, the sacrifice will start with the cold brews.

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According to a poll by Unimer, carried out last April, the VAT is a topic that all Ticos talk about. The results indicate that 95% know what it is and 7 out of 10 people consider that said tax “will affect them in some way” (remember that it became effective July 1).

30% of respondents indicated that “it will greatly affect their expenses”, while 14% said that with the tax (still not in force at the time of the poll) couldn’t already make ends meet.

The poll was conducted among 200 people from all social strata who expressed their opinions on the Internet. Half of the respondents were between 18 and 35 years old and the rest between 35 and 54. The sample has a margin of error of 6.9 points at a 95% confidence level.

The respondents were asked about what products that will be consumed less as a result of the VAT.

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First, they mentioned fast foods (78%), consumption in restaurants (76%), tickets to concerts or movies (68%) and beer (69%).

As explained by Ana Meléndez, director of the project at Unimer, the questions were open and the respondents said they would cut back on products that came to mind, in addition to the above, cutbacks would be also on things like going to the gym (67%), private medicine (58%), buying shoes (58%) and buying clothes (57%).

Surprising, the poll results showed that the majority of the respondents would not give up their Internet (75%), cable television (69.8%) or Netflix (56%)

In his analysis of the poll results, Javier Angulo, director of Finance at Unimer, said it is a matter of prioritizing and that the results show people’s perception, some based on consumer misinformation about the what the VAT really affects.

For example, the VAT does not affect the purchase of goods because they are already taxed. On July 1, the sales tax on goods became the VAT. No change. For example, the purchase of shoes or clothing or beer is not affected in any way. The 13% sales tax before July 1 became the 13% Value Added Tax on July 1. Same with beer.

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However, prices on the items above may be affected as businesses, as part of the regular operation, will pay the VAT on services such as legal, accounting, Internet, etc, used to run their business.

Angulo added that the poll results indicate a case of prioritizing.

“Although there may also be people who are willing to sacrifice or reduce some expense, not so much thinking about the product, but in other priorities because other expenses increase. The poll indicates reducing consumption, not stop consuming,” said the expert.

Although too early to see still see how the VAT will affect consumers, experts foresee that total household expenses could rise by 10% with VAT and from there, consumers will start prioritizing what goods and services they can cut back if their income isn’t enough.

 

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Q Costa Rica
Reports by QCR staff

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