The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged to reduce the Bahamian petroleum industry’s taxation burden by focusing on the non-Value Added Tax (VAT) levies.

Gowon Bowe, the Tax Coalition’s chairman, told Tribune Business that while the sector was heavily taxed, ‘exempting’ it from VAT would only “complicate” its affairs while still resulting in increased gasoline costs for consumers.

This would stem from the inability of petroleum wholesalers and retailers to recover or ‘net off’ their 7.5 per cent VAT input payments, and Mr Bowe called on the Government to instead focus on the other two taxes - the flat $1.06 per gallon of gasoline levy, plus 7 per cent Stamp Duty.

The Tax Coalition chief’s comments came amid suggestions that VAT should not be levied on gasoline sales, because it is effectively applying ‘tax on a tax’.

K P Turnquest, the Opposition’s deputy leader, told Tribune Business he “agrees 100 per cent” that gasoline sales should be VAT ‘exempt’ because it was “already taxed”.

Arguing that levying VAT on top of the existing two taxes was “not very fair” to Bahamian consumers, Mr Turnquest said: “I think we need to find a more efficient way” of taxing the petroleum industry.

The Ministry of Finance, and its VAT Unit, this week warned gasoline station dealers against ‘double charging’ consumers VAT, adding that the price shown on the pump was deemed to be ‘inclusive’ of the tax.

This, Mr Turnquest added, showed that the rules seem to have been changing all along. We’re all confused when it comes to VAT and gasoline”.

Mr Bowe, though, said he had heard little disquiet from the industry after the Government agreed to a temporary transition mechanism where VAT was initially only levied on wholesale/retail mark-ups until pre-2015 inventories were exhausted.

He added that VAT and the petroleum industry’s price control restrictions now appeared to be “harmonised” after new prices were advertised last week.

Still, Mr Bowe, who is also the Bahamas Chamber of Commerce and Employers Confederation (BCCEC) chairman, agreed that the Government needed to review the non-VAT components of the petroleum industry’s tax structure.

“I know the petroleum dealers will tell you that in the absence of their retail stores, they don’t make a profit, as the margins don’t cover the expenses to run the station and franchise fees,” Mr Bowe told Tribune Business.

“From that perspective, fuel is heavily taxed, and there needs to be consideration from the Government as to how to bring that down over time and the rationale for it.”

However, Mr Bowe called for any review to focus on the sector’s other taxes as opposed to making it VAT ‘exempt’.

“It makes it more complicated than it needs to be,” he explained of ‘exempting’ the petroleum industry. “There needs to be consideration to reduce the other taxes and keep the VAT.

“It needs to be the other mechanisms. At the end of the day, what is going to be the surviving consumption based tax?”

Mr Bowe emphasised that “cherry picking” industries and goods to be VAT ‘exempt’ undermined the ethos of keeping the tax base and, in turn, the rate as low as possible.

He added that the Ministry of Finance had already indicated a desire that, if VAT was successful and hit revenue projections, it will look to combine Stamp Duty and other levies under the new tax’s umbrella.