One member of the automotive industry in The Bahamas has already spent $300,000 on the requisite accounting software and will have to spend $1.7 million to become compliant with the regulations of the value-added tax (VAT) regime.
As the government continues anemic educational efforts on VAT, in an atmosphere of grave public concern and even outright fear, Bahamas Motor Dealers Association (BMDA) President Fred Albury and BMDA member Jason Watson are voicing the concerns of their industry with the implementation of VAT in January 2015 looming.
Watson, operations manager at Automotive Industrial Distributors (AID), revealed the cost of getting ready to be VAT compliant and went further, arguing that it was a physical impossibility for him to be ready in less than four months to comply with VAT regulations.
Albury, who owns Executive Motors, said he had spoken with industry colleagues in St. Lucia and St. Vincent and The Grenadines - two of the Caribbean countries to most recently introduce VAT - and word from them was he should expect a 20 to 30 percent decline in new car sales.
"The impact on the consumer (in terms of escalating costs) is going to be tremendous," he said.
"It's going to drive the market towards the low-end used cars, which is going to have an impact on government revenue," he added.
Albury, who orders his inventory five months out, says he has already decreased his order, and both he and Watson raised the issue of price control on new cars. Auto dealers will not be able to raise the price on new cars to offset the value-added tax, they say, because of price control measures.
Watson forecasted a price hike on everything else in order to absorb the cost of VAT compliance, $1.7 million in his case. Albury wondered how he - with an average year-end bottom line of 1 to 2.5 percent net profit - can absorb the 7.5 percent of VAT.
Albury added that he would like to see the excise tax further reduced.
The number of Caribbean countries that have introduced VAT continues to expand; at present they include Barbados, Jamaica, Trinidad and Tobago, Antigua and Barbuda, the Dominican Republic, Haiti, Dominica, Belize, St. Vincent and The Grenadines and St. Lucia. Guyana and Grenada are currently in the process.
The BMDA was created to police the industry and act as a sounding board for government policy, among other things, and is comprised of new car dealers who are the authorized franchise dealers in The Bahamas. The BMDA is a member of the Coalition for Responsible Taxation.
The men appeared as guests on the radio show "You and Your Money", hosted by Jeff Lloyd.

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