The Tribune

By ANNELIA NIXON

TRIBUNE Business Reporter

anixon@tribunemedia.net

THE BAHAMAS Chamber of Commerce and Employers’ Confederation (BCCEC) yesterday urged the Government to consider temporary, targeted tax relief and other measures as it warned businesses cannot indefinitely absorb escalating gas prices.

Don Williams, BCCEC chairman and acting chief executive, with fuel prices approach $7.50 per gallon and threatening to further drive up the cost of goods and servicesm said companies have been seeking to mitiigate the impact for months by cutting costs and expanding work-from-home arrangements where possible.

“Well, the thing is, businesses have been adjusting because of fuel prices,” he said. “Fuel prices just haven’t increased over the past week. Fuel prices have been increasing over the past a few months. Businesses have been adjusting - from providing those work from home options, cutting back on their costs.” 

Mr Williams was responding to former prime minister Dr Hubert Minnis, who has called for the Government to reduce or eliminate VAT on fuel, particularly diesel, while encouraging businesses to allow employees to work from home where feasible to reduce consumption.

The Chamber, in a statement yesterday, called on the Government to urgently consider temporary and targeted tax or other relief measures as gasoline prices near $7.50 per gallon.

Mr Williams said the greater concern is that many businesses have not yet passed their increased fuel and operating costs on to consumers, raising the prospect of further rises if the pressure continues.

“Now the problem that we’re facing is a lot of businesses have not increased their prices to offset the increase in fuel,” Mr Williams said. “So as the Chamber, we’re more concerned about at what point are businesses now going to be forced to increase their prices on their goods and services to be able to facilitate their increase in overall overhead.”

The Chamber said the impact of higher fuel prices extends beyond the pump, with increased transportation, delivery, employee commuting and equipment costs flowing through supply chains and ultimately affecting consumers. It warned that smaller businesses could be particularly vulnerable because sustained fuel increases can erode already narrow profit margins when combined with rising wages, insurance, utilities and imported goods costs.

Mr Williams said businesses have been encouraged to continue making operational adjustments, but warned that those measures have broader economic implications.

Gasoline prices have risen substantially since the beginning of the year, with the latest increase expected to take prices to about $7.50 per gallon. A previous Tribune Business report found that Esso dealers had been notified of a 44 cent increase that would take gasoline from about $7.06 to $7.50 per gallon.

The Chamber said there is no single fuel price at which every business becomes unsustainable, as the impact varies by sector, business size and fuel dependence. However, it said the cumulative effect of prolonged increases is the greater concern.

Mr Williams said work-from-home arrangements have already become one tool businesses are using to reduce costs, although the option is not available across all industries. He cautioned that such arrangements are not practical for businesses that require workers to be physically present, including gas stations, retail operations, medical services and other customer-facing businesses.

“A back office operation may be able to sustain a work from home environment,” he said. “But for those that are in service, retail, things like medical industries, anything that is customer-based, where you have to meet and greet or provide a service face-to-face, it’s difficult to now see them having these work-from-home policies.”

The Chamber said the Government should examine measures such as reviewing the10 percent VAT applied to fuel or establishing temporary relief mechanisms while international fuel prices remain elevated.

Dr Minnis has separately proposed a reduction of the VAT rate on gasoline to 5 percent, eliminating VAT on diesel and applying lower rates to businesses and home owners as part of a broader effort to ease high energy and transportation costs.

His diesel proposal is aimed particularly at industries such as fishing, boating, construction and heavy equipment, which depend heavily on diesel and could face further pressure as fuel prices rise.

Fuel retailers have also renewed concerns about the impact of the current tax and margin structure. Clyde Rashad, an Esso gas station operator, described the current price environment as unprecedented but said retailers must continue operating despite the pressure.

“It’s unprecedented what we’re seeing in terms of prices, but we got to roll with the punches and do the best we can,” Mr Rashad said.

He added that retailers had only recently received an increase in their margins, while their operating costs have continued to rise alongside the cost of purchasing fuel. When asked whether dealers should receive another margin increase, Mr Rashad said the measure would ultimately place additional pressure on motorists.

“Ideally, that wouldn’t be what anybody wants, because the consumer is going to be the one who pays that ultimately,” Mr Rashad said. “So, like I said, given that we just had an increase, we’re going to have to do the best we can with VAT and just roll with the punches.”

He said his focus will instead be on improving efficiency and reducing expenses. “I’m just going to do the best I can to improve my operation and cut down on expenses,” Mr Rashad said.

However, Bernard “Porky” Dorsett, operator of Porky’s Rubis Service Station, argued that the Government is now benefiting more from the higher fuel price through VAT than retailers are earning through their gross margins.

“The Government now making more money on VAT than we making on our gross profit,” Mr Dorsett said. He called for VAT to be removed temporarily, arguing that service station operators face a range of expenses that the Government does not.

“They don’t have no business to run,” he said. “We got staff, insurance, light bill, water bill, every other kind of bill. They need to drop the VAT because they right now taking home more money than we take home.”

Mr Dorsett also renewed the industry’s long-standing argument that dealer margins should be percentage-based rather than fixed. “When they give us a fixed margin, the higher gas go, the more money they make and the less we make,” he said.

The Government increased gasoline dealer margins from 54 cents to 79 cents per gallon in 2024, while diesel margins were increased to 50 cents, following years of lobbying by service station operators. Dealers have continued to argue that a percentage-based margin would better cope with rising fuel prices and operating costs.

The Chamber said the Government must balance any relief measures against its revenue needs, but argued that the economic cost of continued price increases must also be considered.

“If businesses are forced to substantially increase prices, reduce services, cut employment or scale back operations, the consequences could extend throughout the wider economy,” the Chamber said.

Mr Williams said the Chamber has also been engaging with retailers to explore possible ways to ease the pressure, although no agreement has yet been reached.

“So we’ve been trying to work out proper dialogue with one or two of the retailers to see what it is that can possibly happen to assist,” Mr Williams said. “That’s open dialogue. We haven’t been able to come to a decision per se as to what would be the way forward.”

Tribune Business waas unable to reach Leon Lundy, minister of transport, for comment on whether the Government is considering reducing or removing VAT on fuel, as well as what measures his ministry plans to pursue to assist fuel retailers and consumers facing higher costs.