The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Freeport’s private sector was yesterday breathing “a huge sigh of relief” after the Government abandoned plans to levy Value-Added Tax (VAT) on ‘bonded’ fuel sales.

Larry Albury, Freeport Jetwash and Auto Mart’s general manager, told Tribune Business he received a call from the Grand Bahama Port Authority (GBPA) early yesterday morning to inform him that the Christie administration had reversed course.

While expressing delight at the Government ‘u-turn’ on a move announced within the past week, Mr Albury said the episode had further unnerved GBPA licensees over its intentions towards Freeport’s economy.

The Freeport Jetwash chief said many businesses were “scared that the law is not going to be upheld” in relation to the Hawksbill Creek Agreement, and the rights and privileges afforded to the GBPA’s 3,500 business licensees.

Such a theme was echoed by the city’s best-known QC, who told Tribune Business yesterday he would launch Judicial Review proceedings against the Government should any of his businesses be charged VAT on their ‘bonded’ fuel purchases.

Fred Smith QC, the Callenders & Co attorney and partner, said the episode demonstrated how the Christie administration will “continue to eat away like a cancer” at Freeport and the Hawksbill Creek Agreement.

“I remain amazed at the disconnect between the Ministry of Finance and respect for the provisions of the Hawksbill Creek Agreement,” Mr Smith told Tribune Business.

“I am not surprised they are attempting to expand VAT beyond the statutory restrictions, and notwithstanding the apparent respect for the Hawksbill Creek Agreement in the VAT Act.

“I am confident that this government will continue to eat away like a cancer at the Freeport exemptions under the Hawksbill Creek Agreement.”

Tribune Business revealed on Tuesday how the Government last week demanded that 7.5 per cent VAT be levied on all ‘bonded’ fuel sales to GBPA licensees “going forward”.

The “11th hour” imposition was contained in a February 24, 2015, letter sent by John Rolle, the acting VAT Comptroller, to FOCOL Holdings’ financial controller, Denita Nixon.

The document, obtained by Tribune Business, described how the Government wanted the BISX-listed petroleum products distributor and its retailers to account for VAT on their January 2015 fuel sales.

However, it then informs them: “Going forward, all fuels sales (including sales to licensees of the Port) must be charged VAT at the standard rate of 7.5 per cent.”

Many in Freeport’s private sector regarded this demand as breaching both the VAT Act and Hawksbill Creek Agreement, as the former stipulates that the 7.5 per cent levy was not to be charged on bonded/duty-free transactions between GBPA licensees.

Bonded fuel sales involve purchases for vehicles owned by GBPA licensees, and which are used solely for business purposes. Like other ‘bonded’ sales, they attract no import duties and, therefore, no VAT.

The Ministry of Finance, in a statement issued late last night, confirmed that the Government had reversed course.

It warned, though, that itself and the VAT Department were implementing “new administrative procedures” to ensure fuel purchased as ‘bonded’ was used solely for business purposes by GBPA licensees’ vehicles.

“We will be working with petroleum distributors to track fuel sales, so that the proper follow up can be done to verify that purchases are for business and not personal use,” a Ministry spokesperson said.

“In the coming days we will begin our discussions with the fuel distributors in the Port area to perfect these systems.”

The Ministry statement confirmed that licensees can purchase bonded fuel without having to pay VAT on such supplies.

It now wants to establish audit procedures to track the use of bonded fuel supplies, rather than have GBPA licensees pay the VAT and then claim a credit or refund.

“Use of the credit and refund policy has been suspended,” the release said.

Although the Government has now backtracked, Mr Smith said he would not hesitate to initiate Judicial Review proceedings “to prevent charging VAT on bonded fuel”.

“My companies daily purchase bonded fuel, and if we are charged VAT thereon today, I will sue,” he warned. “If not, I won’t.

“I urge the Government, especially after Father Harry Bain’s speech at the Memorial Service for Sir Jack Hayward, to do the right thing by Freeport, instead of continuing to punish Freeport, as is the Government’s habit.

“They may as well just deport everyone from Freeport to Nassau and shut the city down. That seems to be the Government’s objective.”

Mr Albury, meanwhile, told Tribune Business that GBPA licensees had feared VAT on ‘bonded’ fuel sales was the start of “a domino effect” that would lead to the 7.5 per cent levy being applied to all duty-free product sales in Freeport.

“I got a call from the Port Authority stating that they have recalled that,” he disclosed of the Government’s ‘u-turn’.

“It’s a huge thing because it’s now not on the fuel. We were scared it was going on everything; a domino effect. The Hawksbill Creek Agreement would have been nothing, yet it’s a document on paper that’s legal and binding.”

Despite the apparent ‘victory’, Mr Albury said the episode had done nothing to inspire confidence among GBPA licensees that they and the Government shared the same interpretation of the Hawksbill Creek Agreement.

“All the licensees are very concerned,” he told Tribune Business. “There needs to be an understanding from the Bahamas Government as to what the Hawksbill Creek Agreement is.

“This is why we see Freeport may be stagnant to some degree. We need to be left alone to conduct business within the law. People are scared the law is not going to be upheld.”

Mr Albury added: “We came here to do our business because of the Hawksbill Creek Agreement. When the Hawksbill Creek Agreement is being breached, or not being followed, we are wondering where we are.”

Still, he described the Government’s reversal as “excellent news” and “a sigh of relief” for GBPA licensees, showing the rule of law was still being upheld in the Bahamas.