Online Shopping Tax & Trinidad E-Commerce

The immediate post-election talk about this online shopping tax did pique my interest because it fell in my ‘gyaden’, but my concern instantly faded when the new Finance Minister dismissed it just as quickly by saying he did dismiss it quickly. To write something about it would have been to write something for writing’s sake and not my thing. Ahh! like my word play eh?

Then I saw on Business Newsday of Oct. 22, 2015, on the full-page cover to boot, a big article around the media release of the American Chamber of Commerce of Trinidad & Tobago (AMCHAM) , ‘cautioning’ against an internet sales tax. I’m honestly racking my brains to figure out when this became an issue again and what caused me to miss it.

I’m guessing that this is actually the Chamber’s reaction to the original story several weeks later, only after passing through the bureaucracy of internal process typical of local business associations. Also typical, is the missing the point and the suggestions of pointless and politically correct ‘solutions’ belying the MBAs that in theory I expected to produce something better (how naive of me). Additionally, they also missed the opportunity to advance the cause of their members, but then again, we all know that’s always the last thing on the list.

Then there’s Newsday’s own ‘insights’ in the article, conducting a poll and reporting ‘mixed reactions from online shoppers’. Glaringly absent from AMCHAM’s media release, and Newsday’s background research, is any reference to local online stores and the impact as if they didn’t exist. That my friends, is gross negligence on their part. However, I’ll do their jobs for them.

Before I get into why it’s a bad idea, let’s be clear about why the idea is seemingly being tossed around or even entertained. Though the real reason is to placate local business owners, they also include:

1. Reducing the “tremendous leakage”s on T&T’s foreign exchange to pay for their imported goods (being reported as the main reason)
2. Address the loss of sales (over $500M USD per year) to online shopping from US sites (the other reason but not saying in so many words)
3. Add a new tax stream to raise an additional six billion TTD in revenue from tax collection

Fortunately, Finance Minister Colm Imbert said that it is something that the Government would be studying over the next year. I don’t have to tell you how a Trini government ‘studies’ an issue. There is a good chance that it will remain buried in the to-do list, just like proclaiming the rest of the Electronic Transaction Act.

The Finance Minister also said that the new administration had received several proposals to implement a tax on online shopping. I’m wondering where theses proposals came from. Even if they did come from inside the administration as a means to bridge the revenue shortfall, I’m positive that it was from external, self-serving advice from big business in T&T to preserve the status quo.

No doubt that local manufacturers need foreign exchange for machinery, supplies and services, but then there are many importers as well putting strain on US Dollars. The government, manufacturers importers share some responsibility for the increasing demand for US Dollars:

• Manufacturers: who import raw materials when some can be produced locally
• Manufacturers: who produce items using local sources (like furniture), but are woefully sub-standard. Case in point, I bought a locally produced 3-piece sofa set, and in matter of months, nails started protruding
• Government: for an inefficient/absent system for utilizing local inputs in manufacturing, say via legislation for a percentage of local inputs (I’m saying this in general, not to this gov’t necessarily)
• Government: for not supporting the raw material production in the various industries to begin with
• Importers: content on importing everything under the sun but focusing on the cheap knockoff shit from China passing them of for genuine
• Importers: for not even bothering to offer local products as options

In my September 20 article, I did point out that online credit card transactions must be paid first, the same point mentioned by the Imbert in the post-budget forum at AMCHAM.

Nothing like self preservation, local businesses are feeling the $500M US pinch and and looking outward instead of inward for the solution. Last year they were crying big tears over their loss of sales to online shopping on US sites. So the solution is to penalize the customer. Funny though, local business treats customers like parasites yet want them to ‘come back to us!’.

It’s not only a terrible idea— it’s a DOTISH idea, and the idiot who came up with it should be fired. But it’s no surprise that those we put in charge of our governance usually don’t have two brain cells to rub to spark an idea. However, in their defense, I’m sure they were using all their brainpower.

So Trinis embrace the internet and join the rest of the world to the twenty year old ‘new’ way of shopping. Leave it to government and big business to suck the life and joy out of anything bringing a shred of ease and convenience to the common man.

Businesses must be aware that though they are slow to embrace the the internet, Trini’s aren’t. Any move to bring an online shopping tax has the potential to backfire through both online and offline rebellion, so I would advise the Government to tread carefully.

The government nor local business, stopped to look into why Trinis are shopping online but quickly had the solution. Yes there is ‘leakage’ of US Dollars but the solution is not a plaster. Don’t address the symptom but look to finding the cause, and it doesn’t require a commission of inquiry, it requires some common sense: shopping online on US sites is easier, faster, cheaper and much better.

The mechanisms for local online shopping are absolutely available yet local businesses are still slow to get on board. Except for a few forward thinking companies and individuals, Trini businesses are largely ambivalent, on one hand they know they know they should get on board, yet they’re waiting on heaven know’s what.

The end result is what’s happening right now and the reaction we’re seeing.

I’m not sure if to be amused or disappointed that both Newsday and AMCHAM missed the point by focusing only on the US Dollar impact of online shopping.

Newsday missed the boat by excluding questions on why Trinis are shopping on US sites. For argument’s sake, assuming that it’s a given that everyone knows there are no real online options here in Trinidad, there is till an argument that many of the same goods purchased online are readily available at local stores. Then why, pray tell, are Trinis still shopping online?

The reasons why are what I listed above, and Newsday should have asked the same probing questions especially for their business pullout, but instead chose to gloss over the subject and asking all the wrong questions.

AMCHAM mistakenly refers to the courier industry and went so far as to state: “AMCHAM T&T has set up an Express logistics sub-committee which comprises of companies within the courier industry, and specifically deals with the challenges present within that industry.” I don’t know if to laugh or cry. I certainly hope AMCHAM isn’t using all their brains, because there is no evidence of brainwork behind this ludicrous decision to focus on the ‘challenges’ of the courier industry. There answer has nothing to do with having their members’ goods and services available online locally.

Once we identify the reason Trinis are choosing to shop at US sites then effort can be focused on promoting local online shopping. To expand on the quick points I mentioned before, I see a few main reasons why:

1. More confidence in US sites, especially big brand sites like Amazon. Walmart etc.
2. Better pricing even using a skybox and incurring all the fees and taxes to land goods in Trinidad
3. Genuine brand name products; product quality better because they are made for US market
4. There are few bona fide online stores in Trinidad & Tobago
5. Local online stores have less product choice and are more expensive

You read it right. The Big 4 banks in Trinidad & Tobago now off the First Atlantic Commerce (FAC) payment gateway: Scotiabank, First Citizen’s Bank, Republic Bank and RBC Royal Bank. There is not a business in the country without an account in at least one of these banks, that I guarantee you.

Why would all four banks now be on board? Do I have to tell you again? Local E-Commerce is slowly growing and the fact that from just one bank to four in just over a year speaks volumes, and I’ve been braying about this all the time.

The role of the government is to establish the framework to facilitate and encourage growth in the market, then leave it to the market to take it from there. However, the stops and starts are not doing anyone any good and the blame goes right around.

Okay, so enter a new government, and forget all the misgivings about past performance whether justified or not, I’m all for moving FORWARD, pun intended! I do have a general pessimism in any government (not just this one) that anything would get done, but I will concede that at least a token improvement for looks and re-election would obtain, so that’s still something. Of course, I may be proven wrong and this government may well champion the cause of local business and bring about a dramatic turn. If that does happen, pinch me and wake me up.

The remaining five (5) sections of the Electronic Transaction Act (2011) that deals mainly with customer protection, needs to be ‘proclaimed’ so that it can become enforceable as law. This act is NOT the reason why you’re not seeing new online stores and I haven’t once gotten it as an excuse. It’s full proclamation is part of the government’s ‘facilitating’ responsibility.

If the goal is to stem the leakage of US Dollars then Trinis should be encouraged to shop online locally. Again, it’s the responsibility of the government to facilitate such. Instead of an online tax, provide tax breaks to online merchants or other incentives to encourage local online store set-up. Perhaps a national campaign to promote the industry and bring it to the fore instead of chastising Trini shoppers.

Business gets done in Trinidad & Tobago despite the inefficiencies of the system. In this case, the system is there: products, local payment gateway, website designers, courier companies— all the moving parts needed to establish a bona fide online store EXACTLY like our US counterparts. The only thing missing is the will.

It’s as if banks are waiting for merchants to ask instead of promoting its availability. New customers with no track record will obviously have to qualify for the merchant account needed to use the gateway. But existing customers with proven track records, healthy accounts, brick-and-mortar stores can hit the ground running with much less risk.

In addition to promoting the gateway’s availability, what about packaging specialized loans as well? In the whole scheme of things, online store set-up isn’t that expensive, less than $75K TTD to do it right and even half that on a budget, if you already have the inventory.

Our local business associations are long on talk and short on action. I’m still waiting on Chaguanas to become a ‘tech-savvy city’. I suggest they ease up on the breakfast meetings, brunches and cocktails at the Hyatt and do some actual work on behalf of their members. They comprise ‘movers and shakers’ but the only thing moving are their mouths, and I offer no apologies for saying that.

I’ll say it again for the umpteenth time. Trinis want the US online experience here, that’s all, and it’s not rocket science. That’s what they want— find out what it is, get it and give it to them. The good thing is that 100% of it is accessible and achievable, and all we need is just ONE ONLINE STORE in each industry that does it, whether it by computers, clothes, household items, everything you buy online right now, and that store will dominate for years to come.