The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sands Beer’s manufacturer yesterday said “all these unknowns” over Value-Added Tax (VAT) and its own industry-specific taxes were preventing it from moving ahead with a 15-year growth strategy, as it urged the Government to avoid “one big calamity”.

Jimmy Sands, the Bahamian Brewery and Beverage Company’s founder and principal, told Tribune Business that the uncertainty over whether its ‘tax differential’ advantage over Commonwealth Brewery will be maintained, as well as VAT, meant that “I can’t do anything right now”.

Calling on the Government not to “rush into” VAT’s implementation, Mr Sands urged the Christie administration to “get it right first time”, and both push back the July 1, 2014, deadline and bring it in at a lower rate than the planned 15 per cent.

Adding his company to those who have placed planned expansions and job-creating investments ‘on hold’ as a result of taxation-related uncertainty, Mr Sands said there had been “positive talks” with the Ministry of Finance over the Brewery’s own specific tax structure.

Tribune Business revealed earlier this year how the Bahamian Brewery and Beverage Company had postponed a planned $1 million expansion over government plans to increase its tax burden by 75 per cent.

The Government had wanted to increase the duty the company paid on domestic beer sales from $2 per liquid gallon to $3.50, effectively slashing the ‘duty spread’ advantage it enjoyed over its main rival, BISX-listed Commonwealth Brewery, by 50 per cent.

Commonwealth Brewery is paying $5 in duty per liquid gallon, and Mr Sands argued that maintaining the existing $3 tax ‘spread’ was vital to the Bahamian Brewery and Beverage Company’s survival.

While the Government appears to have backed off from its initial plans, at least at the moment, Mr Sands said he still did not have a definitive, written agreement from the Ministry of Finance confirming the status quo would remain.

“We’ve got everything still on hold for now,” Mr Sands told Tribune Business. “I can’t do anything right now. There’s so many unknowns ahead, and there’s this VAT that complicates things even more. It’s another spoke in the wheel.

“It’s [VAT] going to affect everybody, no question about it. It’s going to have a tremendous effect on everybody. The unfortunate reality is that I respect what the Government is doing, but it’s such an aggressive way.”

Taking some encouragement from hints by Prime Minister Perry Christie that the Government may delay VAT implementation if the country is not ready by July 1 next year, Mr Sands added: “I think it’s best to delay it, and try to get it right the first time, rather than put it in and there be one big calamity.

“I think the Government should ease into it, have a smaller rate, and then gradually increase it as the country gets accustomed to this new tax, rather than come into it in a very aggressive way to begin with.”

Revealing how the prospect of VAT has impacted his own business, Mr Sands told Tribune Business: “Right now I’m in the process of putting together a 15-year plan.

“This has always been in the back of my mind. Now I’m putting down a timeline that speaks to which direction I want to go, but I can’t move ahead with all these unknowns I see lying before me.

“I would be foolish to proceed with future expansion until I knew firmly what lies ahead.”

While acknowledging the Government’s need to increase revenues, Mr Sands said the VAT uncertainty was deterring economic growth at the worst possible time, with no Bahamian or foreign investor willing to take risks “under these kind of conditions”.

“It’s just paralysing everything right now, unfortunately,” Mr Sands told Tribune Business, adding that his recently-opened Abaco liquor deal was a “done deal” prior to all these tax issues arising.

“Right now, that’s the last,” he added. “I’m being very, very cautious with what I do. It’s a sad position to be in. We have all these things planned, but that’s life. It’s not only happening here; it’s happening all over the world.”

Mr Sands added that the uncertainty had also impacted his plans for exporting Sands Beer into Florida, affecting the resources he plans to deploy to market and promote his products there.

His first Sands Beer shipment entered Florida two months ago, but he revealed: “One has to massage that.

“That has to be massaged, and right now I don’t have no oil, not knowing what’s coming down the road, to do much massaging.

“The reaction in Florida’s been a positive one, but it’s such a big market over there that one has to massage it a little. You can’t just place it there and sell. It takes energy and means.”

Mr Sands said another beer shipment to Florida would occur in another six weeks to two months, with the brand’s reputation now spreading as far north as Jacksonville.