By NEIL HARTNELL
Tribune Business Editor
Bahamian new auto dealers described yesterday's Budget as "bittersweet", despite it delivering the bonded warehouse and "roadside vendor" crackdown they have been seeking.
Fred Albury, the Bahamas Motor Dealers Association's (BMDA) president, told Tribune Business that implementing the bonded warehouse facility earlier would have prevented him and other new auto vendors from having to "eat" the duty already paid on vehicles subject to yesterday's rate cuts.
And while both he and Ben Albury, Bahamas Bus and Truck's general manager, welcomed the Government's efforts to ensure all industry players competed on a "level playing field", they questioned whether it will be able to enforce the requirement that individuals importing more than two cars every 12 months obtain a valid Business Licence.
The duo spoke out after K P Turnquest, Deputy Prime Minister, unveiled numerous initiatives designed to stimulate the auto industry and better regulate roadside vendors long perceived by established dealers as enjoying an unfair competitive advantage because of the minimal taxes they pay.
Mr Turnquest pledged that the bonded warehouse will be set-up during the 2018-2019 fiscal year to provide auto dealers with "a tremendous cash flow advantage". Under this system, dealers will be able to keep imported vehicles "in quarantine" until they are sold, and only pay due Excise Taxes and VAT when this occurs.
This will relieve auto dealers from the burden of having significant sums tied up in taxes for years until a vehicle is sold. The Government is also reducing the Excise Tax on new vehicles, with engine capacity of 1,500 CC or less, from 65 per cent to 25 per cent - a move likely to cover a significant percentage of many BMDA' members inventory.
Mr Turnquest said the Government's tax policy moves were designed to encourage the importation of smaller, more fuel efficient and environmentally-friendly vehicles, while also making new cars more affordable for Bahamians.
However, both Alburys expressed regret that the bonded warehouse facility was not introduced in time for the 2018-2019 Budget. Fred Albury said it had been offered to the industry under the previous government, and the idea was picked up following the Minnis administration's election.
"They were a bit hesitant and we explained our scenario to them," he told Tribune Business. "That scenario has come to fruition. There is a reduction in Excise Tax on a certain segment of the market, and we have to eat the import tax on existing inventory.
"Had we had the bonded warehouse facility, that would not have happened. I'm going to take a hefty loss on vehicles like my Yaris's, Suzukis and so forth. Consumers are going to expect a certain price level. It's a shame they couldn't do an offset against the Business Licence, but it is what it is. We have to take the bad with the good, and look further down the road."
The BMDA chief's sentiments were echoed by Ben Albury, who said: "We pleaded with them [the Government]. Please don't make any changes by getting up in the House of Assembly and make this statement, and 30 days later it takes effect.
"Most of the dealers have vehicles in stock that were imported at 65 per cent, and now it's at 25 per cent." The Bahamas Bus and Truck executive suggested that the duty reduction should be delayed until January to give dealers time to offload existing inventory.
On the enforcement front, Mr Turnquest said: "The Business License Act is being amended to require persons importing more than two cars per 12-month period to have a valid Business License, as well as to control the unauthorised roadside vending of vehicles.
"To be absolutely clear, the Government wants to continue to encourage all current and future Bahamian entrepreneurs to bring in and sell vehicles if they so wish. However, we are asking and expecting that if you are in the car import and sales business that you get a Business License and join the sector formally. This protects your prospective customers and permits the Government to have a full accounting of the sector."
Ben Albury described the move as "fantastic if they can track it and police it, and go ahead to make sure people don't get around it by importing two in their name, two in their wife's name and two in their aunt's name".
He added: "I'm happy for people to sell cars, but they should do on the same schedule of taxes and fees as I do when operating this business. We welcome the competition. It just needs to be done in a fair manner."
Fred Albury concurred, adding: "The playing field has to be level out there. You cannot expect me to employ 100 people, pay all kinds of taxes and the guy brings in 30 cars a year by the side of the road, pays minimal taxes and gets away scot free.
"It's a bittersweet Budget, but we have to pay our bills, and hopefully this Business Licence tax changes into something more suitable."