The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Motor Dealers Association’s (BMDA) president yesterday urged the Government to implement a 5 per cent payroll tax as an alternative to Value-Added Tax (VAT), and suggested it could generate an extra $30 million annually from simple auto-related revenue reforms.

Fred Albury told Tribune Business that a 5 per cent payroll tax, based on his calculations, would raise an extra $100 million per annum “right away”.

And he added that the Government could easily raise another $30 million via a combination of doubling the existing Driver’s Licence fee; imposing a five-year old age limit on imported used vehicles; and increasing its petroleum tax take by $0.15 per gallon.

Suggesting that all this was preferable to the likely impact from the Christie administration’s proposed VAT, Mr Albury, who heads the Auto Mall, Executive Motors and Omega Motors dealerships, said his proposals needed to be combined with “a serious commitment” to slash government spending.

Calling for the Government to match his $30 million ‘motor industry’ revenue proposal with spending cuts of an equivalent amount, the BMDA chief also urged the creation of a Utilities Regulation & Competition Authority (URCA) style spending watchdog.

And, arguing that the Government would help itself immensely if it increased collection efficiency to 40 per cent of all existing taxes, up from a reported 20-25 per cent, Mr Albury said “if it is to be” VAT it should be implemented at a 5 per cent rate.

“I strongly feel revenues can be raised in a different manner that will not create unemployment and negatively impact the economy,” Mr Albury told Tribune Business, shifting from his earlier support for a sales tax.

“My feeling is to go with a simple payroll tax that can be administered by the National Insurance Board. My annual payroll for Executive Motors is about $1 million, and setting a 5 per cent payroll tax - 2 per cent paid by the employee, 3 per cent by the employer - I’d rather see that than the complicated accounting VAT will bring.”

Backing the Government’s move to centralise all revenue collection in the Central Revenue Agency(CRA) as bringing more efficiency, Mr Albury said NIB’s infrastructure could “back this up” in implementing a payroll tax.

Estimating that the Bahamas’ total gross annual payroll was between $3.5-$3.8 billion, he added: “If we did a payroll tax at 5 per cent, the Government’s going to get in excess of $100 million right away.

“It can easily be put in place without much monitoring. You can take people at the bottom of the ladder, earning $12,000-$13,000 a year, and make them exempt. Those that are earning more can pay more.

“That would be a fairer system for the country to digest. The businesspeople that I’ve talked to would jump at that.”

As for his proposed auto industry tax reforms, Mr Albury said the Government needed to focus on Driver’s Licence fees; gasoline taxes; and used vehicle age limits.

Taking the latter, he said that by imposing a five-year old ceiling on vehicles coming into the Bahamas, the Government would be able to increase its yield (revenue per vehicle) under the existing tax structure, as these imports would carry higher prices/values.

Arguing that this would more than compensate for any reduced import volumes, Mr Albury said: “I did some rough statistics that if we put an age limit on used vehicles, nothing older than five years, we’d get the CIF (cost, insurance, freight) price up.”

Even if the estimated 7,000 annual used car imports dropped to 6,000, Mr Albury said higher yields, even at the lowest 65 per cent duty rate, could generate $15.6 million in extra government revenue annually.

“I calculated that if we’ve got 150,000 vehicles in the country, using 10 gallons of gas per week for 52 weeks per year, and we raised the gasoline tax by 15 cents, that’s another $11 million,” Mr Albury told Tribune Business.

And, if one-year driver’s licence fees were doubled from $30 to $60, given that there were around 150,000 drivers in the Bahamas, the BMDA chief said such a measure could generate another $4.5 million in revenue.

In total, Mr Albury said these three measures - if implemented - could generate an extra $30 million-plus for the Government annually.

Yet he emphasised that fiscal reform could not afford to solely focus on the revenue side of the equation, calling for the Government to find a matching $30 million worth of spending cuts.

“That’s what needs to be done,” Mr Albury said. “It has to be tied into a serious commitment to reduce government spending, and serious enforcement of taxes already on the books.

“If we can bump that up, and the IMF said we’re only collecting 20-25 per cent of what’s out there, if we can take that to 40 per cent, we would not be in the mess that we’re in.

“Governments will be governments. The more taxes they get, the more money they spend, so they need to tax you more.”

And, calling for an URCA-style, independent watchdog to monitor the Government’s spending, the BMDA chief added: “I’d like to see an independent, oversight committee monitoring spending, overseeing the Budget and also doing forensic audits of departments to uncover any fraud and corruption.”

Mr Albury said that above all he wanted the Bahamas to avoid falling into situations like those in other Caribbean countries post-VAT implementation, such as Barbados, where it was reported that taxpayers were refusing to pay real property taxes because the government there still owed them outstanding VAT ‘credits’.

“It’s situations like that I don’t want to see us getting into,” he explained. “We’re at a crossroads where we have to make some decisions. If it’s going to be VAT, couple it with other stuff, implement it at 5 per cent.”