The automotive industry is likely to experience a "big fall out" with the introduction of value-added tax (VAT), one of its major players has argued. The statement came after the government decided to leave vehicles off the small list of imported goods which will see duty reduced to coincide with the introduction of the tax in 2015.
Rick Lowe, operations manager at Nassau Motor Company, said that without reducing duty on vehicles to coincide with the introduction of the 7.5 percent VAT, more consumers will be "pushed into foreign markets, and that's going to then impact employment and (business) viability".
He was commenting after the government tabled the revised VAT Bill and regulations yesterday in Parliament, in addition to a Tariff Amendment Bill outlining the tariffs
which will be reduced when the tax is brought into effect on January 1 2015. The bill calls for VAT at 7.5 percent, with no goods exempted, and a shorter list of exempted services.
While Guardian Business had heard from a number of sources that the government was considering including vehicles as one of the items on a limited list of goods on which duty would be reduced in order to minimize the impact on consumers and the sector, the Tariff Amendment Bill makes no mention of duty on vehicles being reduced in any way.
Just over 100 items face reductions in duty. The list includes cameras (seven percent to duty free), watches (10 percent to duty free), refrigerators (25 percent to five percent), various types of apparel (25 percent to 20, and 35 percent to 20), footwear (25 percent to 20 percent), pharmaceutical goods (35 percent to 25 percent), beauty or make up products (45 percent to 35 percent) and more.
Lowe said: "Our industry, if not the highest taxed, is one of them, and they just keep increasing the burden and sooner or later you reach a tipping point."
"If there's going to be savings to import your car directly, why buy it locally? You have no advantage then of buying it locally except your warranty."
Since July 1, 2013, customs duty on vehicles under $10,000 has been 65 percent. Vehicles costing more than $10,000 but less than $40,000 face a duty rate of 75 percent; those over $40,000 are charged a duty rate of 85 percent.
Commenting on another aspect of the revised VAT Bill, which the Bahamas Chamber of Commerce and Employers Confederation (BCCEC) yesterday welcomed as having introduced "very smart" adjustments to the original proposal, Lowe said that he found it "interesting" how the government is now placing different filing requirements on businesses of different sizes.
"Obviously they are targeting what they perceive as big business. It confirms it's not a simple tax system when you have to start making allowances," he said.
In the VAT Bill, the government adjusted the previous draft of the legislation to allow for monthly filing for businesses with annual taxable turnover of over $5 million, quarterly filing for businesses with turnover of more than $400,000 and semi-annual filing for businesses with turnovers of less than $400,000 but more than the $100,000, for initial VAT registration.
Lowe said that while Halkitis touted how the government is now presenting the revised bill having consulted widely, he is of the view that the automotive sector never got an audience with the government.
"We've asked for meetings with the prime minister and Halkitis, and we've not had a formal response to our request. We've had three meetings with Halkitis and each time (Financial Secretary John) Rolle came to the meeting, so it was obvious they are in a dilemma but it appears they are not willing to really get involved with our industry to get an understanding of where we're at, from the political side. It's very discouraging," he added.

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