The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

More than three-quarters of Bahamian petroleum retailers have gained sufficient “breathing room” from upcoming margin increases to settle their unpaid taxes, it was revealed yesterday.

Raymond Jones, the Bahamas Petroleum Retailers Association’s (BPRA) president, told Tribune Business that the gasoline and diesel margin increases unveiled by Prime Minister will “not go straight into our pockets” but also enable dealers to “live up to our responsibilities” as taxpayers.

Disclosing that “cash flow constraints” stemming from the industry’s inflexible, price-controlled fixed margins have left “the majority” owing VAT, Business Licence fees and other tax arrears to government, he hailed the Government’s “monumental” move in granting the retailers’ request and bringing more than two years of negotiations to an end.

While there has been no official confirmation on when the margin increase will take effect, Mr Jones told this newspaper “it should be fairly soon” with other petroleum retailers voicing optimism that it may be implemented as early as October 1 - less than two weeks away.

Confirming that today’s planned Bay Street protest in front of Parliament, in which petroleum dealers were set to be joined by Association of The Bahamas Marinas (ABM) members, will no longer take place, he reiterated that the margin rise will have a “minimal impact” for motorists, businesses and the wider Bahamian economy.

Mr Jones said that, at current pump prices, someone paying $20 for regular gasoline will spend around $1 extra when the new margins take effect. And a driver purchasing $50 will pay an extra $2.25 based on the prices currently charged by the three oil majors.

And he revealed that the margin increase will enable gas station operators to “give something to our employees” who have endured amid the sector’s “struggle to survive”. Mr Jones said, for example, that the last minimum wage increase had left cashiers “making as much as” pump attendants whose earnings retailers could not adjust due to their financial plight.

Philip Davis KC, speaking on ZNS television on Monday, confirmed that his administration has approved a 25 cent increase in retailers’ gasoline margins while granting a 16 cents rise per gallon of diesel. This will take the margins to 79 cents per gallon of gasoline, as opposed to the current 54 cents, and 50 cents for diesel, representing 46.2 percent and 47 percent rises respectively.

These long sought-after increases, while not giving petroleum dealers all they want, are deemed vital to the industry’s survival - and ability for operators to earn sufficient profit - amid warnings that the existing margins have been “decimated” by post-COVID inflation and ever-increasing operating expenses that have plunged many into consistent losses.

Detailing the many benefits, Mr Jones told Tribune Business: “Retailers will be able to catch up on their outstanding Business Licence fees and VAT that the majority of them are unable to pay because of cash flow constraints.

“They can now meet with the Department of Inland Revenue and really look at how to settle the outstanding fees and taxes they owe. This will not go straight to our pockets. We have debts to pay and now have breathing room to do so. We can go now and say we want to make an agreement to settle outstanding VAT and Business Licence fees due to the Government.”

While unable to provide a figure for the collective sum owed to the Government, Mr Jones added: “I’ll tell you the majority, more than 75 percent of our retailers, have money due to the Government for VAT, Business Licence fees or something of that nature.

“They are committed to paying. A lot of them have gone to develop payment plans to pay the fees and taxes to the Government. It’s a bill that’s due and has to be paid. We appreciate the Government’s effort for the increase, and this will allow us to live up to our responsibilities and make a living.”

The Government, during its two-year plus talks with the petroleum retailers, at one point provided the sector with a collective $6m to ease the financial strain but Mr Jones said much of this was immediately returned to pay past due taxes.

Many observers will likely view the timing of margin increase announcement as a bid by the Government to head-off tomorrow’s planned protest to mark Parliament’s re-opening, which it has successfully achieved. Mr Jones, though, said the Prime Minister’s confirmation - which came after he met with the Association and its members on Monday - “just happened to be timely”.

“We didn’t want to be at war with the Government,” he added. “It’s been a long road but, at the end of the day, we believe the Government has reacted and done something. We demonstrated to them the price [of oil and gas] has gone down significantly over the last two years, and before it took an adverse turn again now was the time to provide us with relief. Thankfully, they reacted.

“I was surprised that after the meeting with yesterday [Monday] that the Prime Minister quickly announced it but that’s fine.” Asked when the margin increase will take effect, Mr Jones replied: “It should be fairly soon. We’re working to confirm with them exactly when it will take place. They have some things to do inside the Government with their processes but we expect it should be fairly soon. No need to wait now.”

Pointing out that it was a change in the margins, rather than a wholesale overhaul of the industry’s pricing structure, Mr Jones said he understood the margin change takes effect through simply being published in the Government’s gazzette and does not have to be approved by Parliament.

“I think that for gas retailers this will give breathing room and, with more rigorous management of operating expenses, allow us to earn a living,” the Association president told Tribune Business. “And, most significantly, we will be able to give something to our employees also. We could not have done anything before this for them because we were struggling to survive.

“This will have a trickle down effect. With the increase in minimum wage, cashiers were making as much as pump attendants while we couldn’t adjust them. Now with this increase, which we expect to come soon, we will be able to look at what we can do for our employees.”

As for the impact on Bahamian motorists and transportation-reliant businesses, such as jitneys and taxi drivers, Mr Jones argued that the margin rise will have a minimal effect. He pointed out that global oil prices have reduced significantly over the past two months and are forecast to continue falling for the next six months.

“Someone spending $20 per week on gas will spend an extra dollar now,” the Association president said, based on the margin increases and current pump prices. “It’s a minimal impact on the motoring public. Someone spending $50 per week will spend an extra $2.25. If the price continues to decrease in the short-term that will be less.”

As of yesterday, gas prices in New Providence were $5.45 per gallon at Rubis, $5.61 per gallon at Shell and $5.35 per gallon at Esso. Mr Jones said these were $1.80 to $1.90 less than around two years ago when pump prices peaked at $7.31 per gallon in 2022.

“This will also help reduce overdraft costs,” he added. “Purchasing costs for retailers will be less if the price has gone down and our bank fees will go down.” Given that the margin increases are VAT inclusive, Mr Jones explained that 2.5 cents of the 25 cent gasoline margin increase will go to the Government as will 1.6 cents of the diesel rise. Retailers will retain 22.5 cents and 14.4 cents, respectively.

“It’s a step in the right direction,” he reiterated of the margin increase. “It’s a monumental thing that the Government has done on our behalf and we thank them for that. There’s no need for a protest. If anything, we will go and shake their hands as they heard our pleas.”

Peter Maury, president of the Association of Bahamas Marinas (ABM), whose members were due to join today’s now-aborted protest, said that while the 16-cent diesel margin increase will enable marinas to better cover costs associated with providing fuel it represents a further expense hike for visiting boaters.

He reiterated his belief that it would have been better for the Government to cut its petroleum-related taxes, something it has repeatedly said it has no intention of doing because it will have to make up the foregone revenues elsewhere.

But Mr Maury pointed out that, with its $1.16 per gallon charge plus 10 percent VAT, the Government is the biggest financial beneficiary from the petroleum industry - with retail and wholesale margins minuscule compared to its take - while doing none of the work.

“It’s going to help us cover the cost but doesn’t do much for customers because now it just gets passed on to them,” Mr Maury said. “It just seems like the wholesaler makes 10 percent, the retailer makes 15 percent and the Government makes 50 percent. It’s crazy.

“It will definitely help cover our costs, but we just pass all that on to the consumer. It doesn’t do anything to promote the business... The wholesaler brings it in, delivers it to the retailer. We carry the inventory overhead as we have to pay for it when we get it, pay staff, pay higher utility costs and then sell it. They [the Government] do nothing.

“When they compare The Bahamas to, say, Key West where you can buy fuel for $3, it puts us as a higher cost destination and I don’t think they understand that.”