The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Solar energy providers yesterday urged the government to clarify “random and inconsistent” tax policies that are threatening “to kill an infant industry before it gets a foothold”.

Philip Holdom, president of Alternative Power Supply (APS), told Tribune Business it was “giving with the right hand and taking away with the left hand” despite recently-introduced measures to permit entire solar systems to be imported duty-free.

While the 2018-2019 budget made whole systems, referred to as “solar kits”, free from border taxation once Ministry of Finance approval was obtained, Mr Holdom said Customs was still levying duty on individual components brought in for repairs and other purposes.

Arguing that it was impossible for solar providers and installers to conduct business in such an arbitrary tax environment, he further revealed that replacement parts imported under a warranty were being subjected to a 45 percent duty rate plus ten percent stamp tax and 12 percent VAT.

Branding this “excessive taxation” and “a detriment to the ease of doing business”, the Alternative Power Supply president warned that the government was threatening to undermine its own policy drive - much touted by the prime minister - of encouraging Bahamians to pursue renewable energy solutions to both lower their power bills and benefit the environment.

“Regarding ‘solar kits’, this tariff was introduced to ensure that all ‘Balance of System’ solar parts related to a solar system or ‘solar kit’ fall under the duty free status of solar,” Mr Holdom told Tribune Business via e-mail.

“The reasoning is that a solar system is a collection of specific solar parts that make up a functional system, and that any part that is removed negates the solar system from working. We challenge anyone to take a solar panel on its own and show us what they can do with it, without a specialty mc4 cable and a specialty charge controller.”

KP Turnquest, in unveiling the 2018-2019 budget’s tax breaks and adjustments, had confirmed: “We are eliminating duties on solar kits upon application to the Ministry of Finance. Presently solar panels are duty free, and this new allowance will mean that vendors or individuals who are bringing in full solar kits can have all related elements brought in duty free.”

Mr Holdom, though, suggested that this was not working as the Government intended. “Unfortunately, with the introduction of the tariff heading ‘Solar Kits’, we then discovered that any solar duty free component outside a ‘kit’ was now dutiable at a higher rate,” he disclosed.

“This is the Government giving with the right hand and taking away with the left hand, and we have objected to this. If solar systems are to be duty-free then let them be duty-free. Solar companies cannot conduct business when the rules are randomly and consistently changing all the time.”

Mr Holdom said solar batteries were a prime victim of this inconsistency, explaining: “All solar batteries were previously duty free, whether landed in a solar system ‘kit’ or landed separately. Recently, we landed a pallet of solar batteries on their own and we were informed, without any warning or notice, that the solar batteries were 10 per cent duty.

“We objected to this ‘blindside ruling’ and asked for an explanation as to the rationale. We received none. It is our position that a solar battery is a solar battery - whether it lands on our shores alone on a pallet, or is grouped with with other solar components.”

The APS president added: “Customs has argued that ‘yes, but can that wire or breaker be used in any other application’? Our response has always been: ‘Only one out of one hundred parts could be used in another application, but no one in their right mind would be importing specialty solar wires for other uses since they are way more expensive than standard wires’.

“The fear that they would be missing out on Customs revenues is unfounded and simply will not happen with a solar product that could be used in another application, but is financially ridiculous to do so, and which wire is not standard in the construction trade or built to suit.”

Calling for the Government to work with the industry to eliminate continuing confusion and uncertainty that is retarding its development, Mr Holdom said: “Another inconsistency is if a part fails under warranty and we ship in the replacement solar part, it is dutiable at 45 percent plus 10 percent stamp and 12 percent VAT on everything.

“We consider this to be excessive taxation, a detriment to the ease of doing business and a way of ensuring that there is no expansion of business vis-a-vis employment opportunities in the sector.

“We encourage the authorities to sit down with local Bahamian solar experts and to work in unison rather than in opposition. The end result will be greater solar integration in our nation, business expansion in the sector and more employment opportunities in this great high-tech industry.”

Mr Holdom conceded that there were “unscrupulous companies” bringing in non-solar batteries and seeking to pass them off as parts of renewable energy systems in a bid to evade tax. He added, though, that APS had not received a single response in 10 years from Customs and the Government to its offer to help identify legitimate solar batteries.

“We advised the authorities that instead of penalising the legitimate solar companies bringing in legitimate solar batteries, they should go after the illegitimate non-solar companies instead,” Mr Holdom said.

“Not only can we prove that our batteries are solar batteries, we can show any authority the solar system in which they are installed as they are registered in the BPL SSRG programme. An unscrupulous importer of batteries could not do the same.”

Mr Holdom was yesterday backed by another solar energy provider who, speaking on condition of anonymity, told Tribune Business he had just been on the receiving end of similar arbitrary, confusing treatment by Customs.

Seeking to import a renewable system, the provider revealed his broker was informed by Customs that the “solar kit” tariff heading unveiled in the 2018-2019 budget no longer existed and that the various parts attracting duty as individual components would be taxed.

While solar panels, inverters and charge controllers attracted no duty, the provider said this means 10 percent duty would be applied to the battery “which accounts for up to 50 percent of the cost of the system”.

The solar PV wiring and aluminum racks, which fetch a 45 percent rate, would also be subject to duty. Expressing fears that he would have to “re-quote at a more expensive price” for installing the system, the provider told Tribune Business: “It’s no small issue. It’s a fair increase in the landed cost.

“Typical of government. They’re killing an infant industry before it gets a foothold. The uncertainty is the worst part, and it seems the Government needs to educate itself a bit. Phil Holdom is not the only Bahamian to advise the Government on policy and how to proceed, but he’s not the only one to be ignored as well.”

The provider said he subsequently received clarification from the Ministry of Finance that he branded “as clear as mud”. While assured that the tariff heading for the duty-free importation of “solar kits” still exists, they were told that permission to obtain this concession first has to be granted by the Ministry.

Once granted, providers were able to use the tax-free exemption for six months of the year. However, the provider said it had “dawned on me that this may be designed to be used internally”, meaning that the “solar kits” tariff heading would be applied by Customs once it was satisfied a particular importer met the criteria.

“There’s confusion between Customs, the Ministry of Finance and the general public. Confusion reigns,” the provider said, adding that they had previously brought equipment in under the “solar kits” heading and obtained the duty-free concession without first applying under the process outlined in the Budget.

Marlon Johnson, the Ministry of Finance’s financial secretary, confirmed that the matters raised by the provider were being investigated. He confirmed that the “solar kits” duty-free concession could only by accessed by application to the Ministry and its subsequent approval.

“I’m having the team investigate the specifics,” he said. “The procedure is if persons want to bring in solar kits they have to make an application. We are going to look into it to make sure it’s clearly understood. We’re going to investigate and come up with a determination that ensures treatment consistent with the law.”