The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Kalik’s manufacturer has blamed a near-2 percent revenue slump during the 2024 first half on a government tax crackdown that disrupted “normal purchases” by some of its largest customers.

Commonwealth Brewery, in unveiling its second quarter and six-month results for the period to end-June 2024, said the Davis administration’s enforcement initiatives impacted clients to such an extent that 2.3 percent revenue growth for the first five months was ultimately reversed.

The vertically-integrated, BISX-listed brewer, wholesaler and retailer gave no specifics on how its customers, and sales to them, were impacted as a result of the Government’s ongoing compliance drive to seemingly squeeze every cent of due tax revenue from the private sector.

Gary Lewis, Commonwealth Brewery’s finance chief, yesterday declined to comment when contacted by Tribune Business, saying: “We don’t want to add any official comment to what was published in the second quarter statements.”

Those financials stated: “Commonwealth Brewery experienced a 1.7 percent decline in revenue for the first six months of the year, primarily due to an unexpected disruption in the local market in June. The company saw a 2.3 percent revenue growth compared to the previous year during the first five months.

“However, this growth was negatively impacted during the month of June as certain of our main business customers interrupted normal purchases to address matters related to tax enforcement.” Those customers were not identified, although they include the likes of hotels, restaurants, bars, nightclubs and liquor stores it does not own, as well as purchases by homeowners and visiting yachts.

Commonwealth Brewery’s financial statements showed that top-line gross revenues fell by more than $2.2m year-over-year for the 2024 second quarter, declining from $36.498m to $34.281m. For the half-year, they fell by more than $1.1m, dropping to $66.739m from $67.877m.

As a result, even though total operating expenses declined slightly year-over-year, the company’s second quarter and half-year total profits fell by 22.2 percent and 6 percent, respectively, to $3.543m and $6.091m. The former figure represented a more than $1m decline compared to the 2023 second quarter, while the latter was a $380,000 drop.

Despite the few details made available, the Commonwealth Brewery statements provide a further insight into the impact the Government’s tax crackdown is having on the private sector. The Ministry of Finance and Department of Inland Revenue have been aggressively pursuing companies for taxes said to be owing from previous years that have allegedly been uncovered in recent audits.

A prime example is Sandals disputing assertions by the Bahamian tax authorities that its Emerald Bay resort only reported 40 percent of revenues earned. The resort chain is denying that the property failed to properly disclose “the true nature of transactions” which have sparked demands for $30.844m in allegedly unpaid VAT and Business Licence fees combined.

The Department’s audit findings, which covered six years between 2017 and 2022, claimed the tax arrears had arisen because Sandals Emerald Bay and its operator, Clearview Management Ltd, had under-reported gross revenue income for the period by more than $284m.

The crux of the Department of Inland Revenue’s assessment, and eight-figure tax demand, is that Sandals Emerald Bay over that six-year period only declared the net income received from its parent and not the gross sum collectively paid by tourists to stay at the Exuma property. As a result, the resort both under-reported and underpaid VAT and Business Licence fees for that period.

Sandals Emerald Bay and its operator, Clearview Management, are from the only company impacted by this. Two BISX-listed firms, AML Foods and Cable Bahamas, have both disclosed to their shareholders that they are contesting Department of Inland Revenue demands for around $1m in taxes each.

AML Foods in late 2023 pledged to “vigorously contest” the Government’s demand that it produce nearly $1m in “unpaid” VAT related to Grand Bahama’s post-Hurricane Dorian economic recovery zone (SERZ).

It added then that it will “initiate a formal dispute” against the Department of Inland Revenue’s (DIR) assessment. To trigger the appeal, the Solomon’s and Cost Right operator said in notes to its financial statements that it would have to either place a bond or make full payment of the $925,732 in alleged arrears.

And Cable Bahamas, in its 2023 annual report, confirmed that its Aliv mobile subsidiary was “involved in a formal dispute with the Department of Inland Revenue concerning an assessment issued... for unpaid taxes and fees totalling $1.594m.

“The assessment covered the period from April 1, 2017, to December 31, 2021, and related to VAT and Business Licence fees on insurance proceeds and international inbound roaming charges among others,” Cable Bahamas said, adding that it had “deposited” the disputed sum with the tax authority and aimed to “vigorously contest” the demand.

Many believe the Government is being so aggressive in going after back taxes because it is eager to avoid implementing any new and/or increased taxes to meet its revenue needs and achieve the projected fiscal surplus targeted for the 2025-2026 fiscal year.

Commonwealth Brewery, meanwhile, added of the 2024 second quarter and half-year results: “Revenue growth was achieved in our other core channels, including 700 Wines & Spirits [its wholly-owned retail subsidiary], which had a 1 percent revenue growth for the first six months driven by our strategic locally-produced portfolio and an increase in consumer demand.

“Operating expenses declined by 1.2 percent, driven by targeted cost savings and productivity gains. Results from operating activities for the first six months of the year declined 7.4 percent compared to the previous year as a result of the weak second quarter.

“In the first half of 2024, Commonwealth Brewery realised a net profit of $6.1m compared to $6.5m in 2023. Commonwealth Brewery generated $6m in net cash flow from operating activities during the first half year of 2024, a substantial improvement of $5.8m versus 2023.”