More questions than answers in Tallinn sales tax
23.03.2010, 09:03Retailers say it is an outrage that Tallinn city authorities are still unable to say clearly exactly who and what will be subject to the sales tax that the City of Tallinn plans to introduce in the middle of the year. They also say that the collection of the tax will be very expensive in comparison with revenues, writes Äripäev.
It is estimated that cost of adapting accounting, cashier and sales systems could be as high as 25 million kroons for retailers alone while total related costs of businesses could reaech 65 million kroons.
Andres Heinver, CEO of grocery chain Selver, says that making changes in information systems could cost millions and require additional workforce. "The fear is that we will not be ready by time," said Heinver, explaining that it is still unclear which products the sales tax will cover. "There are more questions than answers and the city does not have them. The worst is that they are trying to do it in the euro year."
According to Selver people, the new tax is bad news for consumers who will see prices go up, bad news for retailers and service companies that need to make additional costs and could see their sales affected and bad news for producers who may have to lower their sales prices.
"Since retailers cannot increase prices today since demand and purchasing power is very low already, we must find ways to offset the negative impact of the sales tax in some other way. This 150 million kroons will come from the profit of companies operating in Tallinn so the companies need to find ways to save this money," said a representative.
It is strange, but it is still unclear which companies will be subject to the new tax, says Paul Keres from law firm Glikman & Partnerid. "While in December the city said that sellers of liquid fuel would not be subject to the new tax, they were not so sure in March although regulations have not been changed in the meantime," he said. "It seems that action came first and thinking came later."
Keres says he had submitted his questions to the city in February, but the city has delayed with the answer and has promised to give its response by April 1.
Most businessmen interviewed by Äripäev complained that the new tax will increase their costs. Alo Ivask, CEO of Rautakesko, Finnish-owned retailer of building supplies and construction materials, said that the new tax requires the stores to change their IT and cashier systems. "We must now differentiate sales by consumer goods and other products," said Ivask, adding that it was not yet clear how big would the company's additional costs be. "But there could be cases where some products within one product group are subject to sales tax and other are not."
Ando Nõupuu, CEO of ABC Supermarkets, estimated that the new sales tax will increase the cost of the company's supermarkets by about 2 million kroons in 2010. "Since sales tax will apply only to selected products, we need to change our product classification and accounting systems and it will cost," said Nõupuu.
Jaanus Vihand, CEO of Ehitus Service, said that when companies are looking for opportunities to make their business more efficient and simpler, the new sales tax will make life more complicated. "For instance, if we have to show the new tax also on the cash receipt, it will be very expensive," he said.
City of Tallinn expects to collect 150 million kroons in sales tax in six months. According to the estimation of tax board, the administration costs of colleting the new tax in Tallinn could amount to 6 million kroons.
The 2010 budget of the City of Tallinn is 7 billion kroons which is 300 million kroons less than in 2009 and about the same as in 2007.