Caribbean News Now!

By Jeffrey Todd
Nassau Guardian Business Editor

NASSAU, Bahamas -- The Bahamas hopes to recoup up to $20 million in lost tax revenue each year by cracking down on the smuggling of tobacco products.

In the search for new streams of revenue, the cash-strapped government announced new legislation on Wednesday to impose pre-approved stamps on all imports entering the country.

Michael Halkitis, the state minister of finance, told the House of Assembly that $25 million is lost each year from tobacco smuggling operations in The Bahamas.

"That is the estimate of what is not collected by authorities," Halkitis said. "It is estimated that with effective implementation of the stamp program, up to 80 percent can be recovered. In this case, that is $20 million annually into the public treasury."

The Excise Stamp Control Bill 2013 would require any tobacco product imported or manufactured in the country to have a unique stamp.

The stamp, created by the Ministry of Finance, proves that taxes have indeed been paid and the companies have been registered with the government. Halkitis explained that officers would begin performing random inspections of manufacturers and goods imported into the country.

"Any product that is on the shelf without a stamp is evidence that taxes have not been paid and there are penalties for non-payment," the minister explained.

Halkitis added that the government is keen not to impose new taxes. Instead, the Progressive Liberal Party (PLP) wants to improve the administration of existing taxes so money can flow into the public treasury. He also anticipated that cracking down on cigarette smuggling could also lead to stopping other illegal operations. By making tobacco smuggling difficult, it could also prevent the illegal importing of alcohol, firearms or drugs.

Stanton Freeman, the owner of President Tobacco Company, is the manufacturer of Rush cigarettes.

Based out of North Carolina, Freeman said that he imports around 30,000 cartons into The Bahamas each year, paying a whopping 220 percent tax on the value of the product.

While the tax might be high, and his margins slim, the North Carolina manufacturer praised the introduction of anti-smuggling laws to keep illegal operations at bay.

"These stamps will prevent people from shipping cigarettes in from anywhere. It will protect us. We have a similar program in the US," he said. "So I would love to see these laws. It's a big problem."

He also pointed out that it's common for criminals to counterfeit major cigarette brands, such as Marlboro, and import them into countries such as The Bahamas. Freeman said that new regulations and laws could also help prevent these practices.

Ryan Pinder, the minister responsible for trade and manufacturing, said that the 220 percent excise tax on cigarettes speaks to the potential profits being missed out by government.

"It is thought that the elimination of the illegal import of tobacco products would not only ensure additional government revenues, but will improve public health, ensuring proper standards of products and controls," Pinder said on Wednesday. "There is also thought that enforcement might reduce the consumption of tobacco products, as it would cause them to be more expensive if they were complying with the tax scheme in place."

Halkitis added that the government is not just looking at cigarette smuggling in its quest for tax dollars.

Foreign-made beers are also popular among smugglers, he explained, and account for millions in lost revenue. He said legislation is expected in this area as well, whereby all importers would be required to use a stamp system.

Republished with permission of the Nassau Guardian

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