The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

A Bahamian cigarette manufacturer yesterday denied it had done anything “untoward” over its alleged failure to place Excise Stamps on its product, adding it had been led to believe it be exempt from the tax on domestic sales.

Executives at Freeport-based Caribbean Tobacco Enterprises (CTE), which produces Palms Cigarettes and employs some 22 persons, told Tribune Business it had never received the Excise Stamps now required to be affixed to all tobacco products.

This was despite repeated requests to the relevant authorities since last September, asking for them prior to beginning production.

CTE executives, who requested anonymity, told Tribune Business they did not want to have a fight with the Government through the media, but would welcome a meeting with the authorities to discuss the way forward on the Excise Stamp issue and whether the company would receive incentives as a Bahamian manufacturer.

“We were asking for the stamps before September; before we started production. We never got the stamps,”one executive said.

“They didn’t have them up to September. They didn’t have them up until April. Now they saying we won’t get the Stamp until we pay this outrageous tax.”

CTE was responding after media reports indicated that Financial Secretary John Rolle would launch an investigation over allegations that Palms cigarettes were being sold without Excise stamps .

These stamps are designed to show that the manufacturer/distributor paid the necessary $0.15 cents per cigarette under the Excise Stamp (Tobacco) Control Act, in a bid to combat smuggling said to cost the Government $20 million in lost revenue per annum.

“What is in the marketplace has been in the market place since we stopped production on May 1,” a CTE executive said. “That was before the Stamp even required a cost. We have produced nothing under the new regime and it’s hurting us financially and our employees.

“We need to settle this. We see responses to articles but we have gotten no response on which direction to take our investment. If we can’t get our Stamps and whatever incentives, just say so.

“I don’t think it’s unfair for us to try and seek some form of incentive. We have been led to believe we were going to get some kind of incentive all along because there is precedence based on other manufacturers. This basically shows how difficult it is for Bahamians to do business in this country, while foreigners dictate to the Government on what to do.”

CTE is essentially in the same position as fellow Bahamian manufacturer, Bahamas Cigarette and Tobacco Company. Both firms had based their entire business model on registration under the Industries Encouragement Act (IEA) translating into full exemption from the 220 per cent Excise Tax on domestic sales. This adds $3 to the per pack price of cigarettes.

They also now have to pay the $0,25, or $0.20, per Excise Stamp fee introduced in the 2014-2015 Budget.

John Wilson, Bahamas Cigarette and Tobacco Company’s chairman, had previously told Tribune Business: “We’re good to go, but we still have to deal with this issue of whether we will be fully exempt from the Excise Tax on domestic sales,.

“Ourselves and Caribbean Tobacco, which are now the two local manufacturers, both have been registered under the Industries Encouragement Act, which gives us certain savings on import duties; we’re exempt from paying that.

“Given that we have that exemption, we expect it to apply to the Excise Act. There’s no reason in principal why we should be treated the same as British American Tobacco (BAT).”

BAT and other foreign tobacco manufacturers, who sell imported product into the Bahamian market, have already argued that domestic manufacturers should not be given preferential tax treatment, citing World Trade Organisation (WTO) rules on ‘national treatment’ to support their case. And it appears that the Ministry of Finance agrees with.

However, Mr Wilson had argued that there was a strong case for the Bahamas to support local start-ups and fledgling industries, given the jobs and domestic economic impact they created.

Pointing out that BC&T would generate utility bill payments, Business Licence fees, National Insurance Board (NIB) contributions and multiple spin-offs for the Bahamian economy, Mr Wilson said the Government’s position on whether Excise Tax would apply to the company’s domestic sales was still uncertain.