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Energy Tax Breaks Urged Amid ‘Double Whammy’ Concern

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Jeffrey Beckles

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government was last night urged to swiftly grant tax breaks for the importation of generators and solar systems to mitigate a “double whammy” from Bahamas Power & Light (BPL).

Jeffrey Beckles, the Chamber of Commerce’s chief executive, told Tribune Business that few retailers “can handle” a hit in both the Back-to-School and Christmas shopping seasons if the state-owned utility continues its daily load shedding through year-end.

Speaking as the chamber issued a formal statement on New Providence’s energy supply crisis, Mr Beckles said the private sector was especially concerned that regular power outages could persist into early Spring and the peak tourism season.

With such an outcome simply “unpalatable”, Mr Beckles and the Chamber called on the Government to bring immediate relief to hard-pressed households and businesses by permitting the importation of renewable energy and back-up power systems at “concessionary” duty and VAT rates.

“We simply want to find a solution, that’s all it is,” the Chamber chief executive said last night. “Electricity has no colour. Our issue is, and we want to be absolutely clear in our own pronouncements, this should not be a political discussion.”

Mr Beckles, who attended the BPL press conference where the scale of New Providence’s generation shortfall was revealed, said the uncertainty over when the current daily load shedding - which typically lasts for between three to four hours at a time - would end had unnerved the private sector.

“If BPL’s pronouncements are what they are; that this could continue through the end of Spring...... They said this could go on to the end of this year, early next year,” Mr Beckles recalled.

“The issue for us is if this is: Take this through Christmas, which is not what we’d like, or take us into the height of tourism season, which is not good for us. We’re saying: In the short term, look at what we can do to reduce duty rates - and create a specific VAT rate - for the importation of portable generators or back-up generators.

“In addition to that, while we understand the entire regulatory framework is in place for solar and all that, the Government has the ability through an exigency order to permit the importation of solar equipment duty-free. We think the Government can take these additional measures in the near term.”

The Chamber, in its statement, added: “Acknowledging that all solutions will require short, medium and long-term solutions, immediate attention should be given to providing short-term relief.

“Such relief should include consideration of exigency orders permitting the import of back-up power systems, including solar systems, at concessionary duty and VAT rates, with such an initiative rolled into longer term programmes to incentivise environmentally-friendly power solutions that take advantage of the country’s natural resources.”

Mr Beckles argued that there was “no downside” to the elimination and reduction of taxes on generators and associated equipment given that The Bahamas’ location in the hurricane zone makes them essential equipment. “They’re not going to go to waste,” he added.

However, on the solar side, renewable energy providers earlier this year criticised the Government for “random and inconsistent” tax policies that were threatening “to kill an infant industry before it gets a foothold”.

Philip Holdom, president of Alternative Power Supply (APS), told Tribune Business then that the Government was “giving with the right hand and taking away with the left hand” despite the tax exemptions for complete systems, otherwise known as “solar kits”, by instead taxing individual system components.

Arguing that it was impossible for solar providers and installers to conduct business in such an arbitrary tax environment, Mr Holdom further revealed that replacement parts imported under a warranty were being subjected to a 45 percent duty rate plus ten percent stamp tax and 12 percent VAT.

In response, the Ministry of Finance said duty rates on solar system parts had been reduced. It added that panels had been duty-free for some time, with solar batteries taxed at ten percent. In the past, it said that duty on these parts has been as high as 60 percent.

Mr Beckles, meanwhile, said Bahamian retailers in particular could not afford for BPL’s woes to drag on into the Christmas shopping season given the negative impact they have suffered during Back-to-School, their second busiest cycle.

“We are in one of the major retail cycles right now, and they are taking huge hits,” he added. “If this continues through Thanksgiving and Christmas into New Year that’s a double whammy not many companies can handle.

“Add to that the fact you’re going to run the risk of taking this into December when the hotels are full, homes are full with persons back from college, that’s something that’s not going to be palatable for us to consider.”

While BPL’s 132 Mega Watts (MW) of new generation capacity from Wartsila is supposed to be installed by mid-December, it is unclear whether these engines will be connected to the grid and operational by then. Mr Beckles suggested BPL will remain “on the high risk side” for some time to come.

The Chamber, in its statement, said the constant power outages were having “a significant negative impact on businesses and economic activity in the Commonwealth of The Bahamas, as well as disrupting everyday life for all citizens, particularly those living and working in New Providence.

“The frequency and increased length of these power outages impedes commercial productivity, reduces much-needed revenues and leads to significant opportunity costs. Accordingly, developing a long-term solution to this issue is paramount to the growth and development of businesses, and in turn, the economy of The Bahamas.”

Urging the Government to use private sector experience and expertise to help address BPL’s woes, the Chamber added: “Commerce requires the highest levels of confidence and certainty, and in the absence of these two critical components commerce will inevitably slow, which would in turn negatively impact the Gross Domestic Product (GDP) of The Bahamas, government revenue collection and economic empowerment.

“The current circumstances of energy supply do not foster confidence and creates uncertainty. The end of the summer months historically represents a period of significant commerce as the country readies its youth for the opening of the school year.

“However, businesses are faced with the difficult choices of having to close their doors or expend significant funds to acquire back-up power supply and fuelling such systems. For businesses with existing back-up power supply, that equipment is being over-extended and will require significant maintenance and/or replacement costs sooner than had been budgeted. Consumers are frustrated by meeting closed businesses or those providing reduced services, thereby creating a self-perpetuating decline in commerce.”

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