The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Motor Dealers Association’s (BMDA) president has urged the Government to “completely eliminate” Business Licence fees to stimulate the private sector, saying: “We’re being nickled and dimed to death with taxation”.

Fred Albury called on the Christie administration to compensate for the revenue loss by increasing the 7.5 per cent Value-Added Tax (VAT) rate by one percentage point, arguing that the Business Licence is “holding a lot of companies back” because of the way it is structured.

The Auto Mall chief explained that the annual levy on gross turnover frequently exceeded whatever profits BMDA members make, sucking away six-figures sums from potential capital investments in their businesses and inventory.

Telling this newspaper that it was “mind boggling” what many Bahamian businesses have to endure to keep staff employed, Mr Albury said his losses “continue to mount” and he was cutting all unnecessary expenses “just to survive”.

He added that some companies were close to “biting the bullet” and either selling or closing, suggesting that he was close to such “a threshold” over his Freeport business post-Matthew.

“My loss from last year was pretty much in line with what it was the year before,” Fred Albury told Tribune Business. “The losses are continuing, continuing. If they were to eliminate the Business Licence fee, do away with that, I’d at least break even.

“My personal opinion would be to do away with Business Licence fees completely, or just leave them at a nominal fee. I’d rather see that done, and if anything go up in VAT by one percentage point.

“That way they’d [the Government] have a more sustainable base to work with, and generate more revenue, but by the same token it would allow business places, who create the jobs and spending that generate taxes, to thrive a bit more.”

The BMDA chief was backed by his namesake Ben Albury, Bahamas Bus and Truck’s sales manager, who told Tribune Business that he could sell “many millions” in vehicles per year and “still make a loss”.

“I’ve paid the Government in the last few years far more in Business Licence fees than I’ve made in profit,” Ben Albury said, adding that the sum amounted to “in excess of six figures annually”.

The BMDA, as an association, also urged the Government to revisit its Business Licence fee approach in a statement issued on Friday.

“The BMDA is a strong advocate for the reduction or elimination of Business License fees, as it is regressive and hampers the stability of a lot of local companies,” it argued.

“In most cases, local new car distributors would either break even or show a small profit if they did not have to pay Business License fees. Profits can be used to either improve their operations or expand when the time is right to do so.

“The BMDA strongly request that Government revisits this burdensome form of taxation that has nothing to do with profits but only on turnover. Streamlining some of our taxes will help our economy to settle on a stronger foundation and allow the private sector to grow and employ Bahamians.”

Fred Albury is not the first private sector representative to call for Business Licence fees to be abolished, or at least radically reformed, and an increase in the VAT rate to compensate the Government for VAT rates foregone.

Robert Myers, the former Bahamas Chamber of Commerce and Employers Confederation (BCCEC) chairman, told Tribune Business late last year that the Government should cut “inefficient taxes across the board”

He singled out Customs duties, real property tax and Business Licence fees, in particular, as examples of such taxes which all have relatively low compliance rates, the Government having previously confirmed that only 40 per cent of Business Licence fee payments were in full and on time.

Mr Myers had called for the Government to instead focus on VAT, given its self-policing nature, and suggested that Customs tariffs be slashed by 4-5 percentage points “across the board” to make way for a 1 percentage point VAT increase.

And the Government, in its 2013 VAT ‘White Paper’, promised to reduce Business Licence fees to a flat $100 ‘across the board’ once the new tax was properly bedded in and revenue streams predictable.

Although it has exceeded its own expectations by collecting more than $1 billion in VAT revenues during the new tax’s first 21 months, the Business Licence fee reduction is another fiscal promise the Christie administration has yet to fulfill.

The private sector, though, has long argued that Business Licence fees represent one of the most inequitable forms of Bahamian taxation, given that they are calculated as a percentage of gross turnover rather than profits.

This has resulted in many companies paying more in Business Licence fees than they earn in annual profits. And it has resulted in high turnover, low profit margin businesses such as food stores and gas stations, plus those impacted by price controls, like auto dealers, paying considerably more than low volume, high profit margin companies.

However, given that VAT is a ‘pass through’ tax that falls on the end consumer, the Government is likely to be reluctant to raise the rate. It would see such a move, and any elimination of Business Licences, as shifting the tax burden more on to consumers (voters) and away from the private sector.

However, Fred Albury told Tribune Business: “We’re being nickled and dimed to death with taxation.

“The Business Licence fee is holding a lot of companies back from making capital investments in their businesses, and increasing inventories. It’s just a regressive tax.”

With new auto sales flat due to a moribund economy, Fred Albury said he and other BMDA members had been forced into cost-cutting to survive.

“My losses just keep mounting,” he added. “For example, I’m cancelling all my radio planner contracts this year, which will save me $30,000. Staff have left and not been replaced. We’re just cutting expenses where we can to survive.

“Some of us will end up biting the bullet and say to hell with it, it’s time to sell up and close up. I’m at that threshold with what’s happening in Freeport. I’m trying to hang in because we’ve been there since 1987, and have got 15-17 people employed, but when you get to the point of throwing good money after bad you have to look at it.

“We’ve been cutting up there, and hopefully by mid-year we’ll be back on an even keel.”

Fred Albury emphasised the auto industry’s capital intensive nature, with dealers seeing huge sums ‘locked up’ in vehicle imports until they were sold.

The resulting impact on cash flows, he added, was compounded by the fact the sector was price controlled, with narrowed margins and meant “profits are not that great”.

“I think VAT has been far more effective for them than what they thought it would have been,” Fred Albury said.

“If I was to save $300,000 to $400,000 on Business Licence fees, I could use that on construction, creating more employment, and the more people employed will be spending more money out there and generating more taxes.

“But everything seems to be geared towards them [the Government] getting more money out of taxes. My real property tax has just increased by $20,000. It’s like there’s just no end to it.”