By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
An ex-Bahamian Contractors Association (BCA) president yesterday said building material price hikes mean the government’s hurricane readiness VAT “holiday” and other tax breaks will just have a “net zero” effect.
Leonard Sands told Tribune Business that the Minnis administration’s initiatives were unlikely to stimulate increased construction activity because clients were “taking a beating” from cost increases that have seen key materials such as lumber double in price and the tax breaks are only likely to offset this.
While praising the government for “doing the right thing” with its 2021-2022 budget measures, he said that the VAT ‘holiday’ planned for July as well as duty reductions to 20-25 percent on other key construction components are simply not sufficient to counter cost increases that have been driven by global construction demand as well as supply chain backlogs caused by the COVID-19 pandemic.
“If you’re looking to spur growth you need to have an advantage that you can present to your customer,” Mr Sands explained. “You can’t. You’re going to have a net zero effect. I am deeply involved in the industry, and prices have increased so much you need to have an increase in benefit of 50 percent to get an advantage of 10 percent.
“While I do applaud the Government, and I think it’s very noble and needed to offset the losses that have incurred, I think they are not going to see an increase in construction because of it. It’s not going to happen, it’s not going to pan out to be enough. It’s not going to give the kind of economic boost they hope.”
Asked how building materials have been impacted, Mr Sands told this newspaper: “In certain cases they have gone up as high as 65 percent. Lumber is taking the biggest hit right now. Pre-COVID, you could have bought a 2 x 4, eight feet, for $6.50. The same 2 x 4, eight foot, is now over $13. It’s a 100 percent increase in cost.
“I’ve had prices for a 2 x 8, 14 feet, as much as $40. You could get that pre-COVID for maybe $21-$22. It’s crazy. The customer is taking a beating. The customer building or adding to a home is taking a beating. I appreciate the Government’s effort; they are doing the right thing, but it’s not enough because the increase in costs is so high. I don’t think they can give more without damaging revenue projections.”
Mr Sands spoke out after the Prime Minister, in leading off the Budget debate in the House of Assembly, revealed that the Government is declaring July as a VAT ‘holiday’ for hurricane preparedness products, although the details on what will be included and how it will work have yet to be released by the Ministry of Finance.
“This year, for the first time, we will undertake a VAT ‘holiday’ for hurricane preparations,” Dr Hubert Minnis said. “This will be during the month of July. This will assist Bahamians and residents to enjoy VAT-free shopping on a range of critical hurricane supplies and equipment.
“The Ministry of Finance will provide the details of the dates and the items to be included for VAT free shopping. I remind the House and Bahamian residents that the VAT holidays are only applicable for eligible items purchased inside the country from local wholesalers and retailers.
“We want people to shop at home so that this money stays at home and benefits Bahamian businesses and, by extension, all of the employees of these commercial enterprises. So, my message to everyone is that they should use the month of July to get their homes and businesses readied for the hurricane season. Take advantage of the savings and avoid the rush.”
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