VAT on books and computers: What should the Government have done?

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Above: Illustration by Adikk/DepositPhotos

BitDepth#1025 for January 26, 2016

There was a bit of furore on social media over the last couple of weeks about the Government’s decision to reintroduce VAT on books and computers, at least some of it fuelled by my own report on the issue. The Chaguanas Chamber of Commerce has since weighed in on the issue, as has historian Bridget Brereton.

It’s clear that the precipitous fall in the price of oil is set to have a deleterious and quite menacing effect on the national economy and the Minister of Finance is being sensible in setting up income streams designed to form fiscal bulwarks against challenges pursuant to the “r” word.

In considering the move to tax books and computers (as well as computer peripherals and networking backbone gear), I’m left with a resonant feeling that this is simply wrong and it’s worth exploring why.

Both books and computers – which are increasingly compact and book-sized themselves – represent a matched pair, bookends, if you will, of affordable access to a world of information that’s essentially limitless.

My first response was based on the possibility of a chilling effect that’s likely to happen as a result of the price increase. And rest assured, the increase will not be a readily measurable 12.5 per cent hike.

Local retailers will jump on the opportunity to raise prices a bit more than that. My own estimate is between 25 and 30 per cent, though some colleagues insist that ready access to prices abroad will stifle such ambitions.

Needless to say, I do not share that optimism. I don’t think the cost of even price controlled food items will see the benefit of a 2.5 per cent reduction in VAT.

It’s pretty easy to see how this kind of thinking might leap off a napkin into full-fledged Government policy. Books, after all, are a kind of luxury beyond the necessity of school textbooks and we tax luxury items, don’t we?

As for computers, well they have become a commonplace commodity and one that’s only led to a majority percentage of the T&T nationals using online services spending their time on Facebook.

But there are other, tangentially related items that seem ready for a discerning look by Minister of Finance Colm Imbert.

The eCAL programme which placed thousands of computers into the school system was poorly supported by a lack of classroom focused software and teacher training. It was also plagued by maintenance issues and looks set, if only because it was a front-section, banner issue for the People’s Partnership Government, to be quietly dropped.

What eCAL needed was fewer computers for free and more end user support, with the Government stepping in to provide hardware for underprivileged students who qualified, after review, for a device supplied by the State.

GATE, which costs at least $700 million per year has been notably lax in enforcing something as basic as the Grade Point Average required of students to access educational opportunities under the programme.

The programme has neither offered means testing for students applying for support nor has it sought to encourage students (perhaps through increased funding for specific courses) to pursue studies that align with national development goals.

But decisions to raise money through taxation are as much about politics as they are about finance and that’s kept GATE on a loose leash since it was introduced.

And this, ultimately, is my real grind with the tax on books and computers.

People who buy computers with VAT added might be less testy about it if that money was to be earmarked for specific programmes that drive technology as a pillar of national development.

Consider the old CKD (completely knocked down) model of car assembly that was once part of an industrial drive in T&T. It did not create a lasting automotive industry, but it led directly to The Bamboo, an aggregation of entrepreneurs with a deep knowledge of car parts and how they are both assembled and disassembled.

Unlike cars, Computers are not so much a commodity as they are a key to unlocking opportunity.

Hardware assembly tends to come first, then software customisation and networking expertise and finally, the Holy Grail of technology adoption, nation and region specific software development that solves local problems.

Why not turn that 12.5 per cent haul from computers into a technology diversification fund, certify hardware assemblers and allow them access to VAT relief to build systems?

T&T has both flourished and faltered with an economy built on producing raw materials for refining abroad which is then reimported as commodities.

We’re not going to be manufacturing hard drives or motherboards any time soon, but we need to develop education and career opportunities that drive our labor further up the development and manufacturing chain of technology.

If we don’t, we will remain consumers of technology, VAT or not.