The government is mulling a clampdown on supermarket chains’ internal pricing practices alongside a national conservation push, as it targets both corporate structures and household habits blamed for keeping the cost of living high, Senior Minister Kerrie Symmonds has revealed.
Transfer pricing – the way companies set prices for goods and services exchanged between different parts of the same corporate group – has been identified as a potential driver of higher supermarket shelf prices, especially where the same group controls importing, distribution and retailing and can add mark-ups at each stage.
According to Symmonds, officials are now looking at possible reforms to require more transparent, arm’s-length pricing between related entities, in a bid to ensure consumers are not paying for hidden “padding” in the supply chain.
A section of the audience at the event. (Photo Credit: Jenique Belgrave/Barbados TODAY)
The energy, business development and commerce minister revealed that ministers are examining the process of transfer pricing, arguing that greater transparency is needed in the way supermarket chains conduct transactions between related companies.
He said: “There is in the minds of several members of the Cabinet a desire, a need, not just a desire, for us to have a fiscal intervention, and part of the consideration that we are now considering is this thing called transfer pricing.”
Symmonds said some supermarket chains control the procurement, importation, distribution and retail sale of goods through different entities within the same corporate group, with mark-ups potentially occurring at each stage.
The minister stated: “What we must, at some soon stage, deal with is the way in which we can make those intercompany or intracompany transactions more transparent… Let us ensure that there are arm’s length transactions treated in the same way as we would if they were unrelated companies, and that there’s no padding taking place in terms of the cost.”
He described the issue as one Barbados has yet to fully address despite such business structures existing for many years.
“We have to have that conversation in Barbados because that is one of the ways in which not only we educate our public, but that we protect our public.”
Symmonds said conservation would become a part of the government’s strategy aimed at shielding consumers from international price shocks.
He pointed to common household practices, including leaving lights, televisions and taps running unnecessarily, as habits that collectively increase energy and water consumption.
He said the government also intends to look beyond individual behaviour by promoting more efficient buildings through stronger enforcement of building standards.
“How do we enforce basic building codes now, which will see for example, in a new hotel, or frankly, in an existing structure like this [with] motion-activated lighting. So that when we all leave in here, all these lights should automatically be able to go off, rather than stay on for the whole day in a room where nobody is, and that is what we do across Barbados, let us be very frank. And if we’re going to talk about seriously protecting consumers, the question of our conservation is critical.”
Symmonds also said Barbados must begin preparing for a transition away from internal combustion engine vehicles.
“We know that we’re coming to a point in time, not too far from now, if the minister of finance and I had our way, it would be within the next five years, certainly, I can’t see it being longer than the next eight or ten years at most, when the vehicles in this country are going to be electric.”
He added: “The truth is they’ve got people today, who go and spend $150 000 on a gasoline or a diesel car, but right next to it can be found an electric or hybrid vehicle with probably substantially less cost to maintain and probably cheaper to purchase but we have to reset the thinking of our consumers, and we have to get people now to reorient themselves and their thinking, and so that is part of the conversation.”
(JB)
