By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday accused of breaching two laws with its new demand that Value-Added Tax (VAT) be levied on bonded fuel sales to Freeport businesses, who slammed its “my way or the highway” approach.

Tribune Business can reveal that bemused Grand Bahama Port Authority (GBPA) licensees have reacted with dismay and anger to the Government’s move, which they believe violates both the VAT Act and the Hawksbill Creek Agreement.

The “11th hour” imposition is contained in a February 24, 2015, letter sent by John Rolle, the acting VAT Comptroller, to FOCOL Holdings’ financial controller, Denita Nixon.

The document, obtained by Tribune Business, describes how the Government wants the BISX-listed petroleum products distributor and its retailers to account for VAT on their January 2015 fuel sales.

However, it then informs them: “Going forward, all fuels sales (including sales to licensees of the Port) must be charged VAT at the standard rate of 7.5 per cent.”

Mr Rolle did not return Tribune Business’s phone calls and e-mails seeking comment yesterday, but his letter - which is being widely circulated in Freeport’s private sector - is causing consternation among GBPA licensees.

Larry Albury, Freeport Jetwash & Auto Mart’s general manager, told Tribune Business that the ‘VAT on bonded fuel sales’ move was another sign of the Government’s disrespect for the Hawksbill Creek Agreement and the city’s businesses.

Questioning why “disharmony” appeared to be a constant theme of the Government’s relationship with Freeport, Mr Albury said the demand appeared to also breach the VAT Act.

This stipulates that all goods imported/sold ‘bonded’ or duty-free in Freeport are also ‘exempt’ from the 7.5 per cent levy, something that seems to have been ignored with the ‘VAT on bonded fuel sales’ imposition.

Mr Albury said fuel was clearly a good, not a service, so any sales to vehicles used by GBPA licensees for their company’s business purposes should not attract VAT.

“It’s very clear that once again, the Government is not adhering to the Hawksbill Creek Agreement,” the Freeport Jet Wash boss told Tribune Business.

“At the 11th hour, we were told that we have to put it [VAT] on gas. We’re hurting in Freeport, and companies will have to pay out more money to put fuel in their vehicles, to charge it, and they will have to claim it back to get benefits.”

Another to express consternation was Callenders & Co attorney Carey Leonard, who told Tribune Business that the Government’s move “runs contrary to the [VAT] Act itself”.

The former GBPA in-house attorney, who had not seen Mr Rolle’s letter until sent to him by this newspaper, said: “Am I missing something?

“The [VAT] Act says if it’s an item under the Hawksbill Creek Agreement that is dealt with as duty-free, Customs free, then VAT does not apply.

“If it’s bonded, duty free, how the hell can you have VAT on something that is duty-free? What’s next on the agenda?”

Mr Leonard said Mr Rolle’s letter cited no legal authority for the ‘VAT on bonded fuel sales’ move, adding: “It gets more interesting.”

Mr Albury, meanwhile, said Freeport Jet Wash had spent “thousands of dollars” upgrading its software system to accommodate VAT, only to now be faced with making further modifications due to the latest demand.

“Every week or two, are they [the Government] going to come out, and we have to up and change something else?” Mr Albury asked. “You don’t call somebody up and, bing bang, change something.

“The software needs to be rewritten. We rewrote the software to show VAT on the ticket when it was sold duty-paid. We didn’t re-write the software to show VAT on bonded sales. It’s not as easy as putting it on a ticket.”

He told Tribune Business that he had previously informed the Government that businesses needed six months’ advance warning of VAT reforms that would require the private sector to modify their software and IT systems.

Such changes were now being required within seven weeks of VAT’s implementation, and Mr Albury said he was only informed on Friday that the tax had to be levied on bonded fuel sales by Sunday.

FOCOL is effectively the monopoly fuel wholesaler/distributor for Freeport, and also owns the majority of the city’s gas stations. Tribune Business understands that Mr Rolle’s letter was also sent to the few remaining independent gas stations to ensure they comply.

Mr Leonard suggested that FOCOL should challenge Mr Rolle’s decision, although he emphasised that neither himself nor Callenders acted as the company’s attorneys.

“Every time they do this, they take money out of our pockets in the struggling economy of Freeport,” Mr Albury told Tribune Business.

“A lot of retailers are saying: ‘When is the Government going to understand the Hawksbill Creek Agreement, and when is it going to stop interfering with our business? It’s a very sad situation.

“We’re here, working under the Hawksbill Creek Agreement, which is a signed, sealed and delivered document under law, and for someone to tell us it’s changed at the 11th hour, you can’t run a business like this.”

Mr Albury’s comments in dictate that the Government’s latest imposition threatens to undermine both GBPA licensee confidence in VAT, and its faith that there will be a positive outcome to the upcoming negotiations on Freeport’s key investment incentives that expire in August 2015.

The Freeport Jet Wash boss said none of Mr Rolle, Dr Michael Darville, minister for Grand Bahama, or the GBPA had returned his calls on the ‘VAT on bonded fuel sales’ issue.

Given the absence of any response, Mr Albury said: “We have no other choice but to bow down to this and pass this charge on to licensees, which is illegal.

“I just wish we could get along in harmony in the Bahamas. We’re all Bahamians in this country, and I just wish the Government would work with us in harmony and put things in legislation, and give us time to do it in adequate fashion, rather than shove it down our throats.”

He likened the Government’s approach to “my way or the highway”, and called on it to work with both the GBPA and licensees to better Freeport.

Mr Albury said it was relatively easy to police ‘bonded fuel sales’, because bonded vehicles had orange tags.

“We’re upholding the law, and we don’t know where out of left field this came from,” he added in reference to the VAT demand.

Tribune Business sources in Freeport’s private sector, speaking on condition of anonymity, said the Government’s move appeared intended to ‘chip away’ at previous Supreme Court rulings that upheld the city’s ‘bonded vehicle’ regime.

The Government’s continuing concerns in this area are two-fold - that GBPA licensees use their ‘bonded vehicles’ outside the Port area, and that some are used for non-business purposes.

While business-specific autos such as delivery trucks and heavy goods vehicles are easy to identify and monitor, Tribune Business understands the Government’s focus is on passenger-type cars owned by GBPA licensees, and used by their top executives.

The theory is that these vehicles can easily be used for non-business purposes, and the sources said the Government appeared to almost be seeking to create two different classes of ‘bonded vehicles’.

They suggested that while those vehicles that were clearly business specific would be able to reclaim, or ‘net off’, VAT paid on fuel purchases against their outputs, any passenger-type autos owned by GBPA licensees might not.

This, the sources said, was intended to ensure such vehicles ‘remained in the company parking lot at night’, and were not employed for personal use.

Meanwhile, Mr Albury confirmed that the Government’s latest VAT imposition had done little to inspire confidence among Freeport’s business community over the upcoming incentive negotiations.

“Again, it’s the 11th hour,” he told Tribune Business. “We know we’re coming to August 2015, and none of us know what’s happening.

“We have people looking to invest here, people who have been here 40-plus years, and no one knows what’s going to happen.”