The world's second-largest tobacco company is "deeply concerned" that local tobacco manufacturers may not be paying the same taxes that its distributors pay on tobacco products and is calling on the government to "act swiftly and definitively to enforce the law" as it relates to locally-made cigarettes.
British American Tobacco (BAT) said it is disturbed by reports that Freeport-based Caribbean Tobacco Enterprises (CTE) may be paying less than the prescribed tax rate and added that it has "further noted" that CTE appears to be operating in violation of the legal requirement to attach tax stamps onto its tobacco products.
This is a requirement of the Excise Stamp (Tobacco) Control Act implemented earlier this year, which the government is now fully enforcing as far as foreign tobacco products are concerned. Its enforcement stringency in this regard was highlighted by a $5 million quarantine of international tobacco products in January over concerns that stamps may not have been sufficiently glued on cigarettes.
In an interview with Guardian Business last week, Stunce Williams, managing director of CTE, said the company is paying "what it is being billed" by the Department of Customs in excise tax, when asked specifically whether it is paying the 15 cents per cigarette tax set out in law.
He argued that local companies should not be subject to the same tax that international products are, pointing to the fact that they have a greater impact on the economy in terms of employment and company profits remaining in the country.
His position is supported by John Wilson, partner at McKinney, Bancroft and Hughes, who recently launched a cigarette factory in Nassau. In an interview with Guardian Business yesterday, Wilson said his Bahamas Cigarette and Tobacco Company is in compliance with the excise tax requirement at present but admitted it is a significant impediment to his business model.
Wilson, who now employs 18 people at his operation, has proposed that local manufacturers be offered the opportunity to pay up to 50 percent of what is being paid on international products, "graduated" in over a ten year period.
In a statement issued to Guardian Business this week, BAT, the largest supplier of tobacco products into The Bahamas - including brands like Rothmans, Lucky Strike and others - suggested that the fact that cigarettes can easily be smuggled into the country makes the lack of full compliance with the act by any manufacturer more concerning for the country overall.
It said: "Any company - whether local or foreign - that is underpaying taxes, deprives the country of legitimate revenue for national development. In the case of a tobacco company, this situation is made worse by the fact that cigarettes are highly susceptible to smuggling.
"It is estimated that The Bahamas is currently losing US$ 20 million annually, due to the illicit trade of tobacco products. This was the rationale for recent legislation requiring that tax stamps be affixed on all tobacco products sold in The Bahamas. It is for these reasons, that British American Tobacco is deeply concerned about reports that Caribbean Tobacco Enterprises (CTE) is paying less than the prescribed tax rate."
BAT said that in the past three years, it has paid $20 million through its local distributor to the government, in the form of excise taxes. $7 million of the total was paid in the past year.
"BAT is fully committed to the initiatives of the Bahamian government to improve their tax collection process and also its fight against illicit trade of tobacco products. For example, in July 2013, BAT chose Nassau as the venue for a highly specialized workshop on customs enforcement - bringing in international speakers as well as customs officials from across the Caribbean.
"It is precisely because of the nature of tobacco products that BAT operates above and beyond legal requirements. That is our standard, and we expect other suppliers to respect the law as their standard. We are calling on the government to act swiftly and definitively to enforce the law and define a level playing field for all competitors in the market."
BAT's statement comes on the heels of concerns raised by other international tobacco product manufacturers, such as Rush Cigarettes, whose CEO, Stan Freedman, said that he would be "very upset" if local Bahamian manufacturers were given a tax break.
"I heard they may be paying less. That would really not be fair to everyone. It's not like you're a little bit pregnant; you either pay or you don't," said Freedman, of the question of tax liability.
Freedman noted that while jobs may be created by producing cigarettes in The Bahamas, they may also be created when local wholesalers distribute cigarettes.
However, Wilson said: "Our position is simple; if (the international producers) want to be treated the same way as us, they should make the investment of opening a factory, put Bahamians to work and contribute in other ways to our economy."
He said that an attempt is presently being made to organize a meeting between all local manufacturers of tobacco products with the government on the matter.
"We're up and running. We're filling some export orders in order to keep our employees working until we resolve this issue with the stamping," he added.
Caribbean Tobacco Enterprises, which produces Palms cigarettes, previously indicated that it believes a lower rate is only fair, as the company incurs higher costs than international firms that export to this country, and seeks to keep more money in The Bahamas.
"We're trying to make sure that some of that money that comes in is staying here," said Williams, adding that the company is prepared for a "David versus Goliath fight" over the matter. The company launched operations in December.
Williams had earlier denied claims reaching this newspaper that the involvement of the prime minister's brother, Kevin Christie, with CTE had in any way impacted its tax treatment.
The managing director said Christie is a "lead sales person" for the company and has not been involved with any of the negotiations over the tax matter, which have been with Minister of State for Finance Michael Halkitis and Minister of Trade Ryan Pinder.
"No, no, no," said Williams, when asked to respond to the claim that Christie's relation to the prime minister had affected the situation to the benefit of the company.
John Rolle, financial secretary in the ministry of finance, said "no comment" when asked by Guardian Business to comment on the issue of what local cigarette manufacturers are being required to pay in taxes or what they may be paying.

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