The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday warned it has one month to inform auto dealers about whether the industry’s Excise Tax rates will be lowered to compensate for Value-Added Tax (VAT), otherwise it may see revenue generated by the sector drop-off in the New Year.

Fred Albury, the Bahamas Motor Dealers Association’s (BMDA) president, explained that with the industry typically ordering from manufacturers four-five months in advance, it would start making such requests as early as July and August.

Expressing concern that the Christie administration will “wait until the last minute” to inform the private sector about VAT-related adjustments to border tax rates, Mr Albury said any uncertainty would result in reduced ordering and inventory levels for early 2015.

And reduced auto imports, apart from potentially impacting sales, would also have the effect of lowering Excise Taxes and VAT generated by an industry that has traditionally been one of the Government’s highest-yielding revenue producers.

Mr Albury, the Auto Mall, Executive Motors and Omega Motors dealer, told Tribune Business that Excise Tax rates on the auto industry needed to be reduced to minimise the inflationary impact from VAT’s reduction.

“It is a concern, especially on the high ticket items,” the BMDA chief said. “Getting into the area of a $30,000 car now, and you put 7.5 per cent on that, you’re going to have an impact on sales.”

Assessing the knock-on impact, Mr Albury said reduced sales would result in dealers importing less inventory, a development that would lead to a drop in the Government’s Excise Tax and Business Licence fee earnings from the industry.

While the Government’s revised 7.5 per cent VAT plan was initially accused of ‘double taxation’, ministers and officials subsequently said some Excise and Customs duty rates will be lowered prior to the new tax’s introduction on January 1, 2015.

With the Government leaving until the last 72 hours pre-Budget to determine that it was going with a 7.5 per cent VAT, they explained that there was no time to assess appropriate, offsetting reductions in border taxes.

The Christie administration now has six months to determine which border tariff rates will be cut, and by how much, but Mr Albury said the window - or breathing space - where the auto industry is concerned is much smaller.

“I’m hoping they don’t wait until the last minute to do something,” he told Tribune Business.

“We’re on a four-five month order cycle. By next month, we’ll be ordering product for December. If I don’t hear anything regarding possible reductions in Excise Taxes, I’m going to be very cautious on inventory levels arriving early next year.

“That will have a big impact on revenues for the Government.”

Mr Albury said Bahamian companies also needed to know how to present VAT, and their respective VAT taxpayer registration numbers, on their documents and stationary.

“There’s a lot to do, but it can be planned correctly,” he added. “There will be hiccups, but we can get it to a minimum.”

Professing himself “considerably” happier with the revised VAT than the original 15 per cent model, Mr Albury said: “That’s the right way to go, VAT at a lower rate with fewer exemptions.

“That would allow me and my parts department not to have to worry about existing inventory. It’s like a 7.5 per cent discount at the end of the day.”

The BMDA president said he was also “keeping my fingers crossed” that the Government would adjust Business Licence fee rates downwards, something he had called for personally pre-Budget.

And, backing the Government’s plan to outsource this function to the private sector, Mr Albury said it needed to focus on collecting the $550 million in outstanding real property tax principal and interest penalties.

Proper valuations and a land database, so the Government could identify the owners and what was owed, was also needed.

“I understand people in the Carmichael Road area are starting to cry,” Mr Albury told Tribune Business. “That’s the boom area, but property values have gone so high - they’re probably like Bay Street - while the tax collected is not the same.

“I understand they’re reassessing that area, so people and businesses are going to be in for a shock when they get those bills.”