The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Last-ditch efforts by Bahamian auto dealers to secure the deferral of Value-Added Tax (VAT) at the border were surrounded by mass confusion last night, with several exposed to five-figure payments on multi-million dollar vehicle shipments.

Fred Albury, the Bahamas Motor Dealers Association’s (BMDA) president, told Tribune Business that the industry had received zero information about how it could complete the processes for obtaining the promised VAT deferral.

Under the VAT Rules unveiled last week just before Christmas, it was revealed that auto dealers must apply to the Comptroller to obtain permission for the deferral of border tax, plus lodge a performance bond (security) equal to “100 per cent of the estimated VAT payable”

Yet Mr Albury confirmed to this newspaper that Customs had provided no help to BMDA members asking how they could meet these requirements, referring all inquiries to the Ministry of Finance.

No BMDA member had seen, let alone completed, the ‘deferral’ application form, while the ‘bond’ is not a Customs requirement but a Ministry of Finance/VAT Unit issue.

Two dealers, including Mr Albury’s Auto Mall, confirmed to Tribune Business that they have vehicle shipments on the dock that will have to be cleared on Friday - the day after VAT is implemented.

Thus, with less than 24 hours to go before the most significant Bahamian tax reform since independence, the auto industry is unable to access promised VAT-related measures that were designed to ease the pressures on its cash flow.

Asked by Tribune Business about the financial impact if auto dealers could not access the ‘border deferral’ in time, Mr Albury replied: “Not a hell of a lot good, let’s put it that way. It is what it is. I’ve got $1 million worth of vehicles coming in, and 7.5 per cent is a big chunk of change.

“Less cash flow means less inventory; less inventory means less revenue; and less revenue means the Government is up the creek by much more.”

And the BMDA president told the Ministry of Finance: “Don’t throw us a chunk of meat and pull it back from us. Follow through on what you promised.”

The Bahamian auto industry’s problems highlight what, for many businesses, could be a difficult VAT transition and ‘steep learning curve’ as they grapple with an entirely new, disciplined tax regime.

And the Government’s late publication of the VAT Rules, with revised guidance notes published just three days before the tax’s implementation, have further exacerbated private sector anxieties over the implementation/transition.

Mr Albury, who said he was now waiting to “get clarity” from the Ministry of Finance, said his dealership would put the ‘VAT deferral’ pledge to the “test” on Friday when it sought to clear its latest shipment.

“Customs has referred me to the Ministry of Finance, and I’m still awaiting word from the Ministry on how this is going to work,” the BMDA president told Tribune Business.

“I understand that there’s a lot going on at this stage in the game, but this is an important matter for the new car dealers. It’s the lack of communication. There should be more communication, and we’re not getting it on the due diligence to get everything in order to meet their requirements.”

Mr Albury reiterated that his vehicle orders for the 2015 first half were going to be “extremely light”, down by 50 per cent or more year-over-year, in anticipation of a VAT-induced slump in consumer demand.

“We’ve been extremely busy recently, and we’re working late tonight to process payments and invoices for vehicles we’ve sold recently,” he told Tribune Business.

“But I am anticipating the first half, the first quarter of next year we will be sitting around twiddling our thumbs.”

Mr Albury said consumer attitudes “have to change”, and many will “start hitting the roof” once their utility bills come in January.

Yet not all auto dealers may tax advantage of the ‘border deferral’. Ben Albury, Bahamas Bus and Truck’s sales manager, said it “doesn’t help us a lot”, having been informed by his Customs broker that it would only last for four months.

“What we were looking for more was a deferral until we sold the vehicle, which may not happen for two years,” he explained. “I don’t see that as being the olive branch we were looking for.”

Ben Albury said his initial view was that the potential cash flow benefits from ‘border deferral’ would not offset the costs associated with putting the bond and other requirements in place.

Yet he conceded his position may change, adding: “I don’t see the benefits at this point in time, but I don’t want to jump to conclusions that could change again. Things change so quickly, and we’re 24 hours away.”

Meanwhile, Fred Albury and Rick Lowe, Nassau Motor Company’s (NMC) operations manager/director, disputed assertions by John Rolle, the financial secretary, that they should have known of the bond requirement.

Mr Rolle said this was stipulated in the VAT legislation, adding that auto dealers should have been aware that this was common practice for sectors enjoying tax-related incentives.

Yet both Fred Albury and Mr Lowe said such a requirement was never definitively spelt out to auto dealers, despite the sector having several meetings with officials from the Ministry of Finance and VAT Unit.

“They said in the meeting a few months ago that VAT was a deferred liability for the new car dealers, and that it would be paid on sales not at the border,” Fred Albury told Tribune Business.

“Since then, we’ve had no correspondence back from them pertaining to this. We’ve requested from Customs and the Ministry of Finance, and so far, nothing.

“When it was stated that this would be the case, it was not stated that this would not be automatic. It was assumed that it would be automatic as we are licensed car dealers.”