By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Top auto dealers yesterday hailed the government's quick execution of promised budget reforms for freeing up millions of dollars in cash flow and slashing vehicle delivery times.

Rick Lowe, Nassau Motor Company's (NMC) operations manager/director, told Tribune Business that the approval of bonded facilities could - for some dealers - release "up to $3m" currently tied-up in excise tax already paid on vehicle imports.

The bond, for which NMC has already received approval, switches the auto industry's point of taxation from the vehicle's arrival in The Bahamas to when it is sold, thereby eliminating the carrying cost associated with paying excise tax up front.

Mr Lowe said the move would benefit both consumers and dealers, and ultimately enable the industry to "have better inventory" in stock once existing vehicles are sold and cleared out of the system.

Fred Albury, the Bahamas Motor Dealers Association's (BMDA) president, told Tribune Business that the bond's introduction would enable his dealership to reduce the 'time to market' for jitneys it sells to the public transportation industry.

The Auto Mall chief explained that he currently imports buses into Freeport, where his business can exploit the existing 'bonded goods' framework under the Hawksbill Creek Agreement to avoid paying Excise Tax up front.

The buses are only taken out, and due taxes paid, once a sale has been agreed, but Mr Albury explained that Nassau-based clients sometimes had to wait "a week or two" for their purchase to be shipped from Freeport.

The Government's extension of similar bonded facilities to the rest of the Bahamas means that Mr Albury can now ship buses directly into Nassau, improving supply chain and logistics management.

The BMDA president said the reforms will also end problems previously encountered in reclaiming Excise Tax paid on vehicles leased to the Government, and eliminate "the ton of money lost" on existing inventory whenever tax rates change - as occurred in the 2018-2019 Budget.

The Government has moved quickly to deliver on promises to ease the auto industry's taxation burden, approving bonds for individual dealerships within three weeks of the 2018-2019 Budget's passage.

"We've got approved for our bond for duty free cars," NMC's Mr Lowe confirmed to Tribune Business. "That's major. At any given point car dealers have millions of dollars in pre-paid duty.

"This should actually be very beneficial to all the dealers' cash flow, and hopefully by the time we get it sorted out and orders are in the pipeline we be able to have better inventory.

"We've got almost as much duty tied up as inventory; not quite, but 65 percent of the value. It's a very positive development for the industry as a whole," Mr Lowe added of the bond.

"We've just got ours, and everyone is at various stages of approval. At any given point it could be up to $3 million [tied up]. It could be higher depending on inventory levels, it could be less. It varies from place to place."

Mr Lowe said the introduction of bonded warehouse-type facilities for the auto industry was "approved in principle" by the former Christie administration prior to the 2017 general election. However, its successor elected not to follow through until its second Budget cycle - the first it was able to claim full ownership of.

Mr Albury said his own dealership was "just about done" in obtaining its bond, and expected to "be good to go by the end of the week" with Customs having already conducted the necessary inspection of his facilities.

He added that the change will prevent a repeat of this year's auto industry dilemma, where dealers have been forced to "eat" six-figure sums on existing inventory after the Budget suddenly lowered the Excise Tax rate from 65 per cent to 25 per cent for vehicles with engine capacity of 1,500 CC or less.

"It will help tremendously with cash flow, and it will also help when they change the rates," Mr Albury told Tribune Business. "We've lost a ton of money in taxes already paid at a higher rate.

"This is going to be a big advantage as we move to the World Trade Organisation (WTO) accession; that inventory will be duty post-paid. If the Government makes any adjustments we won't be impacted this going forward."

The reforms do not alter the Government's revenues, only the timing of when it receives them, and Mr Albury said they will also benefit his supply chain management and vehicle leasing business.

"In my case I sell a lot of buses for public transportation," the Auto Mall chief said. "I used to take them into Freeport because we're also a licensee of the Grand Bahama Port Authority, and hold them in bond until the client got their duty-free exemption.

"Now, we'll be shipping them direct from Japan to Nassau, put them in bond and make a quicker delivery to clients instead of them having to wait a week or two to ship down from Freeport. It makes things more flexible."

Mr Albury added that Auto Mall will also no longer have to seek refunds of Excise Tax already paid on vehicles leased to the Government, further aiding cash flow.

"There's going to be a bit of savings for us on the interest and cash flow side of things," he told Tribune Business. "Not having to pay taxes up front means less outlay of funds and less interest to pay on those funds, plus flexibility with industry selling duty-paid."

Mr Lowe said Customs would receive its due Excise Tax and VAT "on the day of sale or just before", with all dealers having to produce a monthly sales report for the revenue agency.

"If you want to come in and buy a car today, we'll pay the duty today, put in the entry and get the car licensed," he added. Customs will conduct inspections of auto dealers to ensure vehicle inventory matches the sales report, and it will also possess electronic records from when the autos were imported.

"I'm sure they won't give us a licensing slip until the duty is paid," Mr Lowe added.