The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian automotive industry has warned that it will have to “realign” due to the combined impact of Business Licence fee increases and the proposed Value-Added Tax (VAT), a development that could result in job losses and reductions in business size.

The Bahamas Motor Dealers Association (BMDA), in full-page advertisements set to run in the media this week, says the Government has yet to respond to its suggestion that VAT not be charged to consumers “at the point of sale”.

It is calling for VAT to be charged at the border only, so that tax-induced price increases are limited and do not result in a further depression of new/used car sales.

Prime Minister Perry Christie has promised that the Government will not introduce VAT at its initially-proposed 15 per cent rate, something the BMDA said would have increased auto part and vehicle prices by 8 per cent and 10 per cent, respectively.

Labour costs associated with auto service would have risen by 15 per cent, while the way VAT was applied would have cut all vehicle mark-ups by 10 per cent - further exacerbating the impact of price controls.

“BMDA members are urging the Government not to charge VAT to new vehicle customers at the point of sale, as this would increase the retail price even more, causing a further loss of sales,” the advertisement reads.

“Vehicles should only be VATable at the border. Charging VAT on retail will force more people to buy more vehicles overseas, losing warranty protection. This will harm both consumers and businesses.”

With Business Licence fees for the industry now generally pegged at 1.25 per cent of turnover, and real property taxes also on the rise, the advert warned: “The combined effect of these tax changes will force some BMDA members to operate at a loss.

“And this can be expected to bring about a realignment of the industry. Such a realignment could involve staff cuts, facility downsizing and shelving of potential investments.”

The BMDA also expressed concern about the impact VAT’s arrival would have on slow-moving parts in inventory, and the fear they might be exposed to ‘double taxation’ via the old, higher Customs duty rates and new tax.

It warned that new car sales had fallen from a 2007 peak of 4,200 to around 2,200 per annum today, and that the new and increased taxes would impact its ability to ‘hold the line’ on lay-offs.