The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Super Value’s owner has described the impending 131 per cent increase in its annual Business Licence fee to $3 million as “a big pill to swallow”, and fears it will increase the cost of living.

Rupert Roberts told Tribune Business that the $1.7 million rise in the supermarket chain’s Business Licence fee, resulting from the 2013-2014 Budget’s tax hikes, was “a little high, a little excessive”.

Expressing a forlorn hope that the ‘more than doubling’ of Super Value’s annual payment would not become reality, Mr Roberts reiterated that Business Licence fees now exceeded net profits for many food retail businesses.

He echoed fears that the Budget’s tax increases would further retard much-needed private sector growth and job creation, adding that economic activity was “really crumbling”.

And the Super Value owner also expressed concerns that the Government would seek to levy its Value-Added Tax (VAT) on top of import duties, further increasing inflation and food prices for consumers.

But, on a brighter note, Mr Roberts told Tribune Business his three Quality Supermarkets stores were “slightly ahead of initial sales projections”, with all three on course to generate around $1 million per month in turnover.

As a business generating more than $100 million in annual sales, Super Value will see its Business Licence tax rate increase from the current 0.75 per cent to 1.75 per cent as a result of the 2013-2014 Budget reforms.

After being informed by Tribune Business of the one percentage point increase in its tax rate, Mr Roberts replied: “We’re paying $1.3 million in Business Licence fees now.

“If what you say is correct, we will be paying another $1.7 million in Business Licence fees for $3 million. That’s a big pill to swallow.

“That’s a little high, a little excessive and I hope it’s not reality. It’s worse than real property tax.We thought we were high to begin with at $1.3 million.”

Food stores are particularly vulnerable to Business Licence fee increases, as it is a tax on turnover that takes no account of underlying net profit. The sector is a ‘high volume (sales), low margin (profit) industry, meaning that any tax rise weighs disproportionately on it compared to other businesses.

Mr Roberts alluded to this, telling Tribune Business: “Suppose we make just $1.5 million [net profit]? Do we have to pay the $3 million?

“We’ll see how they go and do what we have to do. It’ll be hard to convince them [the Government] that it’s too much, it’s hard to pay and that it’s going to increase the cost of living.

“It’s based on sales. Who knows what sales are going to do? I hope the economy doesn’t slide off for the rest of the year. I hope they don’t come up with anything for $200 million or we’ll be dead.”

The Super Value owner and president also expressed concern that the Government would levy its planned VAT, set to be introduced on July 1, 2014, on the combined landed cost of goods and their associated import tariffs, rather than solely on landed costs.

Warning that this would lead to further price rises for Bahamians, Mr Roberts said: “I’m afraid we’re going to have import duty and VAT.

“That’s going to throw up the cost of living, if we’re not going to take duty off VAT.”

The Government’s 2013-2014 Budget has thus placed Super Value in much the same situation as its main rival, BISX-listed AML Foods.

The latter’s chief executive, Gavin Watchorn, recently told Tribune Business that between the Business Licence fee increase and 1 per cent Customs administrative processing fee, it faced a $2 million annual increase in its total tax burden - a sum equivalent to 60 per cent of its projected net income.

Still, Mr Roberts told Tribune Business that his three Quality Supermarket stores - Cable Beach, South Beach and Prince Charles Drive - were performing well despite an economy that remained 20 per cent off its pre-recession levels.

“They’re doing a little more volume than we projected, but the economy is really crumbling, it’s really bad,” he said.

“We know it’s 20 per cent under when the recession started; there’s 20 per cent less out there to go after. I think we’re doing our fair share of that, but it’s just not out there to get.”

Mr Roberts acquired leasehold interests in the three former City Markets stores for a collective $3.5 million, and he added: “We projected them to do about $250,000 per week in a four-week cycle, $1 million a month. That’s about where we’re at.

“There’s some cannibalisation of the other stores, and if the economy was really back we’d be doing that much better.”

The Quality Supermarket outlet in Prince Charles Drive’s Seagrapes Shopping Centre was doing best of the three, despite its proximity to Super Value’s existing Winton store. Mr Roberts attributed this to the strength of eastern New Providence’s consumer base.

Still, while the Quality Supermarkets chain had created around 250 jobs, Mr Roberts said sales volumes were still not sufficient to cover the extra expenses.

“We planned for that, and have to live with that until the economy improves,” he told Tribune Business. “This economy is the new normal, and we don’t know when it’s going to break out. Everyone is looking forward to 2014 with Baha Mar.”