PARLIAMENT is set to pass a bill imposing penalties for late payment to suppliers today. Retailers argue that the bill will force them to raise prices to meet their debts to suppliers, while smaller businesses will close down.
The bill stipulates that any goods supplied that remain unpaid for more than 30 days will be subject to an interest payment set at seven per cent above the base rate of the European Central Bank, unless there is a written agreement between the two parties. Using current rates, this amounts to about 10.5 per cent interest on delayed payments.
“It’s logical that prices will rise,” said Panicos Papadakis, President of the Cyprus Retailers Association. “We all know that up until now retailers were given a much longer grace period to pay suppliers. Now, with only 30 days to pay and such a high interest, it is a mathematical certainty that prices will rise,” he added.
Suppliers have long voiced their concern over late payment, highlighting delays of up to one year in certain cases, threatening bankruptcy. Suppliers have long complained about supermarket chains, but small businesses are also known to partake in the practice.
“We have asked parliament to go ahead and pass the bill, but delay its implementation until EU accession on May 1, 2004. This will give retailers time to prepare, sort out their books and find working capital. Otherwise, many small businesses will have to close,” said Papadakis.
DISY deputy and head of the House Commerce Committee, Lefteris Christoforou, described the measure as an “EU harmonisation bill”, required for accession to the EU. “We cannot change anything in the bill, it is the same in all EU member states,” he said yesterday. “However, we have agreed to pass the bill in parliament tomorrow (today) but delay its implementation until January 1, 2004, to give retailers some time to prepare.”
Christoforou played down claims that prices would rise even further. “They are using this as a threat. I believe that free market competition will sort out any price rises, especially in supermarkets. But this delay will give them time to prepare their books,” he said.
Regarding the interest level, Christoforou said it was set at a reasonable level. “It is seven per cent on the base rate of the European Central Bank, which is about 3.5 per cent, and not based on our Central Bank which is nearer 4.5 per cent,” he pointed out. “This is not too much. It will cover the costs of the supplier. Up to now, big supermarkets were taking advantage of suppliers by holding their money, which could have been sitting in the bank, for long periods of time,” he concluded.
