The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Motor Dealers Association’s (BMDA) president says a corporate income tax levied on net profits would be “fantastic” for the industry if it eliminates a Business Licence regime that can tax companies into a loss.

Ben Albury, also Bahamas Bus & Truck’s general manager, told Tribune Business the proposed reforms - if implemented as outlined in the Government’s ‘green paper’ - could ensure that price-controlled, high turnover/low margin sectors such as the auto industry are no longer left “holding the bag” by a taxation regime that is presently levied on gross revenue or turnover.

“I think it depends on which one of the directions they go,” he said of the potential impact. “It is going to be scaling back on other taxes? Is it going to be on gross turnover? Is it going to be on net profit? If it is going to be on net profit, that would be fantastic because we’re high dollar turnover and low profit margin.

“It will definitely be pro to us, and I’ve spoken to a number of businesses that follow the same model and they’re echoing the same sentiments. As it stands now, you could generate a great deal of sales, but with slim profit margins and the high cost of business and expenses, you could end up losing money but still paying the Government or paying them based on a high turnover where, in the end, you come up short and are left holding the bag.

“That would be a fair way to do it, based on the net profit. It’s something we could get behind and would be happy to pay our fair share. With price controls and the high cost of doing business, it’s difficult when you have to pay Business Licence fees on your gross turnover.”

Mr Albury told this newspaper the Association hopes to discuss the rationale for continued imposition of price controls on the auto industry with the Government given that such restrictions are “a little outdated” given the intense competition dealers face both in The Bahamas and abroad.

Presently, the allowed mark-ups or margins on new and used cars stand at 25 percent and 15 percent, with the BMDA president describing the latter as “pretty tight when you look at expenses and costs”. Parts, too, are also price controlled with a 75 percent margin permitted.

“Definitely its something during this term in government that we’d like to have a chat with the present administration on to see what their views are on that,” Mr Albury said of price controls. “In this day and age it’s not like we’re selling a necessity which we have a monopoly on, in which case it would require some restrictions and we would have some controls.

“I totally understand that we don’t want people gouged and taken advantage of, but in this day and age in our industry it’s a little outdated. Opportunities we may have to capitalise on, with big purchase discounts and where we find a deal, we’re not able to go ahead and exploit that. In this competitive day and age, the market will restrict itself where necessary. As other businesses have to do, too, we would have to remain in line.”

The BMDA president said Bahamians would seek to purchase vehicles online, or physically go to the US, if local dealer prices were uncompetitive or totally out of line. He added that staying competitive on price also ensures money continues circulating within the local economy, creating the prospect that it “comes back to me” at some point.

Meanwhile, the Bahamas National Statistical Institute released data showing that inflation and price increases are slowly starting to moderate, although many families will argue they have not seen or felt the effects yet. For May 2023, the month-over-month inflation rate increased to 0.4 percent, representing a slight decline on April’s 0.6 percent.

As for the trailing 12 months, the inflation rate to May 2023 dropped to 3.6 percent compared to 4 percent for April. This was the first time the annual inflation rate dropped below 4 percent since February 2022, some 15 months ago, and was the lowest 12-month trailing figure since the 3.4 percent recorded for July 2021 almost two years ago.

Gas and diesel prices fell by 6.5 percent and 16.6 percent year-over-year for May 2023, respectively, continuing the decline seen in April. “The monthly inflation rate in The Bahamas, which represents the overall change in prices for 2023, increased by 0.4 percent when compared to April 2023,” the Institute said. 

“This increase is reflected in the overall price of items purchased by the average consumer during this period. This May 2023 increase followed a 0.6 percent increase between the months of March 2023 and April 2023. The category of ‘restaurants and hotels’ saw an increase of 1 percent when compared to the previous month. The housing, water, electricity and other fuels category also recorded an increase of 1 percent for the month of April 2023.

“On a year-over-year basis, the consumer price index rose 4 percent over the same period last year in 2022. The major categories that contributed to this rise included ‘alcoholic beverages’, along with ‘furnishing, household equipment and routine household maintenance’ and ‘recreation and culture’ with increases of 10 percent, 8 percent and 8% percent, respectively,” it added.

“Diesel prices, along with gasoline, declined 17 percent and 7 percent respectively compared to this period in 2022. However, compared to April 2023, gasoline prices increased by 2 percent while diesel prices declined 2 percent for the month of April 2023.”