A local car dealer cleared six SUVs through the Department of Customs at a rate of 60 percent, the day after Prime Minister and Minister of Finance Hubert Ingraham raised the duty rate on such vehicles to 85 percent, The Nassau Guardian has learned.

In total the car dealer allegedly shortchanged customs by more than $28,000, according to documents obtained by The Guardian.

The documents show that the goods entered the country on May 25, when the applicable rate of duty on that type of SUV was still 60 percent.

However, on May 26, during the 2010/2011 budget communication in the House of Assembly, Ingraham announced that a rate of 65 percent will be taxed on passenger vehicles with an engine of 2,000 cubic centimeters or less, and a rate of 85 percent will be charged for all other passenger vehicles and trucks with engines larger than 2,000 cubic centimeters. The changes took immediate effect.

The May 25 declaration forms show that the six 2010 model SUVs - all with engines over 2,000 cubic centimeters in size - were valued at $112,062. On May 27, the car dealer paid $67,237.20 to clear the vehicles at the old rate of 60 percent, documents show.

Had the correct rate (85 percent) been applied, the dealer would have had to pay $95,252.70 - a difference of $28,015.50.

Customs officials are now wondering how that could have happened. And have reportedly been trying to contact the dealer about the "misunderstanding".

Up to Friday, the dealer had still not paid the difference, according to a customs official not authorized to speak about the matter.

As it regards the valuation of vehicles after the rate restructuring, The Guardian understands that expressed instructions were given to all customs officers not to clear any cars on May 26, until Ingraham made the announcement.

It is also understood that after the prime minister made the announcement around 11 o'clock that morning, customs officers were then allowed to clear vehicles at the new rates.

However, a later rate restructuring means the dealer will probably only end up owing the government about $17,000.

After Ingraham's initial announcement, car dealers complained that it would be too costly to import vehicles and that the move threatened their businesses.

Some dealers claimed that hundreds of orders for new cars were canceled within 24 hours of the rate increase.

On June 3, Ingraham said that after meeting with the New Car Dealers Association, the government agreed to modify the tax system to create a new category.

The prime minister amended the rate structure so that vehicles with engines of 2,000 cubic centimeters or less will have a rate of duty of 65 percent, larger engines that are less than 2,500 cubic centimeters will have a rate of duty of 75 percent, and engines over 2,500 cubic centimeters will have a rate of duty of 85 percent.

Those changes take effect on July 1.

The six SUVs that were brought in have engines less than 2,500 cubic centimeters in size. Therefore if the 75 percent rate is applied, the duty would amount to $84,046.50 - a difference owed of $16,809.30.

The prime minister indicated that those who paid the higher rate of duty since the first announcement would receive a tax credit if their vehicles now fall into the 75 percent bracket.

"We have determined that it is not in the interest of The Bahamas to continue to facilitate the import of large vehicles," Ingraham said. "Those who wish to do so should do so and pay the cost. The duty rate of 85 percent is not new. There has been a duty rate of between 55 and 85 percent on the books for 15 or more years."

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