Dear Editor,
To begin with, the basket of goods concept should be in line with inelastic demand before government begins to set policy on tariffs and taxation for businesses, consumers and public enterprises. The price of goods in the basket are based on supply and demand, distribution chains and government control. Any change in prices in the basket will have an effect on suppliers and the receivers of goods. Items such as bread, milk, flour, cornmeal and rice have no close substitutes, and people will have to buy them even if the price is high or low.
Regular monitoring and control of the basket of goods is necessary to protect the purchasing power of the low wage earners. The price of goods for hygiene purposes such washing soaps, Clorox, toilet-paper, dish liquid, toothpaste and other cleaning materials must be affordable to the public as low-price control items. The basket should also be in line with the Consumer Price Index. The CPI is a statistical collection consumer spending on certain goods over a certain period of time. It usually shows an increase or decrease in the cost-of-living figures for the period. The cost-of-living Index is an important measure in setting policy for taxes and tariffs for businesses and customers. The total invoice of goods in the basket plays a significant role in calculating taxes on goods in reference to the amount paid by the customers to government regarding who pays or who doesn’t.
In regard to the consumer price index, reference should be made to the amount of the invoice including trade and cash discounts if any, and the channels of distribution for the goods in basket. The basket of goods helps keep items at control price and protect consumer spending. Who pays for the goods in the basket? Please see the demonstrated example of the purchasing power of two families. Here is a typical example of consumer spending for one month on selected items in the basket of goods. Family A monthly spending amount total is $200. Goods in the basket were subject to 10% trade discount on reaching the retailer from the manufacturer or the wholesaler, i.e., 0.10 X 200 = $20. The real cost now $180. Let’s say the retailer adds 3.5% Turnover tax to the $180, i.e., 0.035 X 180 = $63. The price for the basket of goods for A will now be $245. So, $63 will go for tax.
Family B invoice total is $150. Trade discount from the manufacturer/wholesaler is 10%, retailer adds 3.5% tax on the items. Based on policy for example government might add 10% to the goods as tariff. B’s budget can also be calculated. See A’s information above. Final consideration: Who pays the burden of taxes in the basket of goods? From the wholesaler to the retailer and to the customers, and even if we
bypass the middleman, the business usually passes on the burden to the innocent consumers.
Government must take a firm stand with its policies to protect the poor people.
Joseph Harvey
