The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

New auto dealers are hoping for a last-minute compromise with the government over budget reforms that could result in just two companies "dominating the market".

Fred Albury, the Bahamas Motor Dealers Association's (BMDA) president, told Tribune Business that the 1.5cc engine capacity limit on the 40 percentage point excise tax cut threatened to create "a lop-sided" industry where a minority were "smiling all the way to the bank".

The 2018-2019 budget is cutting the excise tax rate for such vehicles to just 25 percent, as the government seeks to make new, smaller and more fuel efficient and environmentally-friendly vehicles more affordable for Bahamian consumers.

Mr Albury, though, pointed out that several new auto dealers had no models with an engine size below the 1.5cc benchmark. Describing this as a "difficult" threshold for many to meet, the BMDA president suggested a 2.00cc limit - and slightly higher Excise Tax rate - would be the preferred solution to maintain a competitive industry.

He reiterated that the sector's other concern is having "to eat" the tax already paid on existing inventory subject to the tax reductions, which at present will force some dealers to write-off "hundreds of thousands of dollars" they can ill-afford to lose in a sector that has suffered a decade-long contraction.

And the BMDA chief also backed calls for a 10 per cent VAT with minimal to no exemptions, arguing that this would be easier for Bahamian consumers to "digest" than the planned 60 per cent rate hike to 12 per cent.

"The 1.5cc break point for determining the lower tax rates is very much in favour of two dealers," Mr Albury told Tribune Business, declining to name them. "It's very lop-sided, and could be to the detriment of some dealers. Two dealers will dominate the market, and others will not have much of the pie.

"A fair break point where all dealers would have a horse in the race would be at the 2.0 level, even if they have to raise the tariff a little from 25 per cent. That 1.5cc is a difficult point. A lot of engines start at 1.6cc. Some point a little bit higher than 1.5cc would give some dealers" a better chance to be competitive.

Praising the intent behind the Government's Budget reforms, Mr Albury added: "I understand what they're trying to do but I would have liked them to have been more consultative with the position of each dealer, so they could have they could have taken in and helped all of them, and not see two dealers smiling all the way to the bank and others having to lay-off staff. That's not where we want to be."

Besides engine size, the BMDA chief said the sector's other unresolved issue related to "existing stock that came in at higher duty rates" prior to the changes unveiled in the Budget. With the price of such models lowered by around $10,000, dealers will be forced to "eat" the higher tax paid if they are to sell such vehicles.

Mr Albury said the industry was seeking "some sort of offset" for tax already paid, possibly against Business Licences, VAT or future Excise Taxes. He told Tribune Business: "I don't want to say exact sums, but we're talking considerable amounts of money already paid that we will have to eat.

"There was a request last year to have some sort of bonded facility, and had it happened we would not have to come asking for some sort of credit there. I'm talking hundreds of thousands of dollars; not hundreds of dollars, but hundreds of thousands of dollars, involved here.

"Business being what it is, and what it has been for the last 10 years, for a company to have to write-off hundreds of thousands of dollars that's going to be a tremendous impact."

Tribune Business understands that last-minute changes to the Budget's tax reforms, and accompanying legislation, are now likely to be few if any - especially given that the Minnis Cabinet was meeting yesterday to finalise all items before the Prime Minister's debate-concluding address in the House of Assembly and approval of the 'line items'.

Mr Albury acknowledged that the BMDA had made little progress in resolving its outstanding issues with the Government, even though it had submitted its request. "We're hoping that before this is finalised we can have some sort of dialogue and come to a compromise on the matter," he added.

"While I felt VAT was going to increase, I did not expect 12 per cent. I'm in full agreement with Rupert Roberts [Super Value's owner] of 10 per cent across-the-board. It's a lower number that people can digest and try and live with it there.

"For the business places to change things around; some stuff is duty-free, some is VAT-free, and others are not, that's a difficult software programme they have to put in place."