The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Value-Added Tax (VAT) confusion continues to reign in the petroleum industry as the tax is initially applied to retail/wholesale mark-ups, one dealer yesterday saying: “It’s one big mess”.

Tribune Business’s research indicates that the uncertainty appears largely confined to gas station operators, with the ‘Big Three’ distributors said to be largely satisfied with the VAT roll-out following a Friday meeting with Ministry of Finance officials.

Franklyn Wilson, chairman of BISX-listed FOCOL Holdings, said he had been informed by management that VAT “doesn’t create any hardship for us”.

He confirmed that the three petroleum distributors - Sol, FOCOL and Rubis - had been invited to a meeting at the Ministry of Finance, after being told “not to proceed” with their initial VAT roll-out plans just days before the January 1 implementation.

“All I know is the meeting went well, we’re pleased and can comply,” Mr Wilson told Tribune Business. “It doesn’t create logistical issues for us and so forth. Whatever it is, we can comply.

“It [VAT} doesn’t put any extra burden on us, and we’re ready to go. It is going. From my point of view, it doesn’t create any hardship for us.”

Tribune Business was unable to discover what was precisely agreed at the meeting, as top management executives at the petroleum distributors could not be reached for comment.

Keith Glinton, Sol Petroleum’s (Esso) Bahamas country manager, was said to be out of office when Tribune Business called. Anthony Robinson, FOCOL’s managing director, did not return this newspaper’s call seeking comment.

However, this newspaper was able to confirm that the Bahamian petroleum is currently levying 7.5 per cent VAT on the retail and wholesale mark-ups, not on what the consumer pays.

This means that its impact is being barely felt by Bahamian motorists, as VAT amounts to just cents on gasoline margins that stand at $0.54 per gallon for retailers, and $0.33 for wholesalers. Diesel is $0.33 for retailers and $0.18 for wholesaler.

Oswald Moore, the Bahamas Petroleum Retailers Association’s chairman, confirmed to Tribune Business that the 7.5 per cent levy was being applied to wholesale/retail mark-ups.

“The only change, as of January 1, is that on the mark-up retailers have, you charge VAT on it,” Mr Moore said.

“Our mark-up is 54 cents, so it’s 7.5 per cent on top of that, which works out to be about four cents.”

But other gas station operators, speaking to Tribune Business on condition of anonymity, were far less assured about VAT implementation methods.

One said he did not even know that the industry was levying VAT on mark-ups, saying that his supplier had only sent a technician to make his systems and pumps VAT-ready.

“They didn’t explain any of that,” the dealer said about levying VAT on the mark-up. “The technician came and put VAT on the machine, and that was it.”

Another dealer said: “I’m not even really sure what’s going on. One day I’m hearing from head office that we’re not supposed to do it, then Michael Halkitis says we’re supposed to do it, and head office says we have to do it.”

The dealer said they had been supplied with both VAT ‘inclusive’ and ‘exclusive’ pricing, only to then be told to “hold off, don’t do it and stick with the old prices”.

“It’s one big mess,” they told Tribune Business.

This newspaper reported how gasoline dealers were not charging VAT on petroleum sales on New Year’s Day, with some choosing to close amid the chaos that gripped the sector.

Dealers, and their wholesale suppliers, were especially concerned that levying VAT on gasoline sales would cause them to breach the limits set by the Price Control Act.

Further complicating the matter, Gowon Bowe, the Coalition for Responsible Taxation’s chairman, said he understood the ‘levying VAT on mark-ups’ policy was only a short-term measure to ease the transition to the new tax regime.

This charging method, he explained, was to apply only until dealers exhausted the inventory they had purchased pre-VAT implementation. Once this happens, they will have to levy the 7.5 per cent on what the consumer pays.

“I understand that’s only for existing inventory until the existing inventory has been exhausted,” Mr Bowe told Tribune Business of the petroleum industry’s charging methods. “Once that inventory is used up, it will be the formula people are accustomed to.”

Mr Bowe said that as a result, Bahamian motorists were paying less for gasoline than expected, but warned this would change “in the next week, week after”.