DailyPost Administrator posted on July 17, 2009 21:30
Vanuatu Weekly Issue 758 Saturday 10 July 1999.
Vanuatu's once much promoted "Hurry Free, Hassle Free Duty FreeParadise"hasallbutdisappeared since the abolition of the old duty free system 18 months ago. Turnover in the old system which was between vt35 million vt40 million a month has now plummeted to around vt2.5 - 3.5 million a month and retailers who used to form the Vanuatu Duty Free Traders Association are all reporting drastic reductions in sales to tourists of between 50% - 70% in turnover compared to previous years as a result of higher prices and increased competition in Vanuatu plus much lower duty free prices being offered in Australia, New Zealand and Asia in particular Bali. The bottom has fallen out of the retail sales market to tourists and a Dumber of retailers have advised the Trading Post that they will face losses this year.
The former Vice President of the Duty Free Association from Paradise Playthings has said "turnover is simply catastrophic this year. General sales to cruise ship passengers have all but disappeared as the only items that are still classified as Duty Free in Vanuatu are alcohol, cigarettes, video cameras and a couple of other minor categories. Passengers off the ships can buy alcohol cheaper on the boat than in town." This comment was verified by Jaqui Gourbalt of Vila Distribution who advised the Trading Post " Our financial year is up next month. We are down in real terms around 30% on the previous year when you take into accountourincreased overheads,our turnover of duty free alcohol has fallen by 50%" Fung Kuei report the same. In the retail outlets that specialize in selling to tourists prices have risen so much as a result of service tax on imports rising to 12% plus the new turnover tax and increases in related costs as a result of the turnover tax being applied to insurance premiums, wharfage costs, transport costs and the like, that tourists are simply not paying the high prices being asked. The problem is further compounded at present with the weak Australian dollar and the over strong yen which has increased in value against the vatu by nearly 50% since Christmas and makes the cost of importing Japanese products exhorbitant compared to bulk buyers iu Australia who can subsequently retail them at much lower duty free rates.
Ian Irving of the Sound Centre and former President of the Vanuatu Duty Free Traders Association confirmed that Vanuatu is no longer competitive saying "In Australia they nave changed the way duty free goods are sold retail. These days most duty free outlets act as agents to manufacturers and sell their products at cost plus 5% or 10% and they are paid a commission on what they sell by the manufacturers. On top of that there are no taxes. How can we compete with this .when we buy in smaller quantities and have to pay what is effectively 20% in indirect taxation on top before we look at any profit? Our retail sales are down 30% on the corresponding period last year. Sales to tourists are down considerably more. We have lost 60% of our duty free sales of compact discs. The only buyers from Fairstar now are the crew and we used to have a profit margin on these of less than 10% and a turnover to each ship of thousands of dollars.
We have also lost 90% of our electronics, hifi and camera business with tourists. Our estimates to government of imports valued at vtlOO million for the year are likely to be half of that".
The Minister for Finance is apparently concerned at the problems being faced by retailers and has reportedly asked for more information to substantiate the retailers concerns. In a letter to Hon Willy Jimmy in June Mr Irving, on behalf of a number of the former duty free outlets advised the minister that in addition to Sound Centres 30% drop in turnover " Paradise Playthings report sales down by 25% over the first four months of the year. The loss is attributed almost completely to loss of sales to tourists which have fallen almost 80%. Sales of alcohol and cigarettes to tourists are down 50% of their level in 1993 due to changes. Fung Kuei loss of sales mirrors that of the Sound Centre." He went on to say "the duty free system in Vila is no longer financially viable generating insufficient income monthly even to run itself and relies now on a monthly levy on traders further increasing their costs".
In a cost analysis given to the ministry the retailers believe that the changes to the downtown duty free system is costing govemmentmoney. In the period to 1st February 1994,
Government income from duty free sales to tourists was aproximately vt2.1 million a month based on aproximate turnover of vt40 million per month and assuming a GIF figure less turnover of vt30 million per month, the government would have received under the old system a total of 7% (5% service tax and 2% business license tax) which totals vt2.1 million. With sales under the new system plummeting to around vt4 million a month and assuming the same percentage mark up total revenue would be only vt595,000 per monthmade up as follows 4% turnover tax vt160,000, 12% sales tax on vt3m CIF at vt360,000 and 2.5% business licence tax on vt3m GIF at vt75,000. Total vt595,000. Mr Irving said in his letter 'the changes have not only decimated business but actually cut down government revenue from duty free sales".
The retailers have appealed to the minister to change the duty free system to make Vanuatu aproper Duty Free bargain centre once again to help the economy and the tourism industry which they believe is suffering. The Trading Post interviewed a number of tourists both off the ships and who are staying in hotels. They all felt prices of products normally purchased duty free were very expensive here. At the time of going to press Minister Jimmy was not available for comment.
Air Vanuatu have confirmed that they are no longer promoting Vanuatu as a duty free shopping haven overseas due to high prices.