By FAY SIMMONS
TRIBUNE Business Reporter
jsimmons@tribunemedia.net
A VETERAN Bahamian gas station operator yesterday renewed calls for the Government to reduce fuel taxes, equal to one-quarter of the per gallon price, to ease pressure on consumers and businesses rather than cut retail or wholesale margins.
Bernard “Porky” Dorsett, owner of Porky’s Rubis Service Station, said the Government needed to act rather than simply continuing to talk of possible relief measures as businesses struggle with higher fuel costs, Business Licence fees and other expenses.
He argued that reducing fuel taxes, including VAT, is a better way to bring down pump prices than expecting the petroleum industry and other businesses to absorb mounting costs. Mr Dorsett added that rising fuel and non-fuel prices are driving up operating costs that he and other retailers are increasingly struggling to absorb on fixed gasoline and diesel margins.
“Most countries all over the world have removed the fuel tax. Remove the VAT of the gas, remove the taxes of the fuel,” he argued.
Mr Dorsett pointed to Barbados as an example of a Caribbean country that has offered fuel tax relief, arguing that The Bahamas should not wait until businesses are in serious difficulty before taking action.
“We have to wait till we bury business people in this country, and then they talk, but bring relief?” said Mr Dorsett. “You wait till the bottom fall out, and then you bring in relief.”
His comments come as the Government considers ways to ease fuel price pressures, with Keishla Adderley, the Prime Minister’s press secretary, saying last week that the Ministry of Finance had been meeting periodically to examine possible relief for consumers.
“I can tell you that the Ministry of Finance has been meeting periodically to take a look at what can be done to see what type of reprieve can be offered to consumers,” said Ms Adderley. “There are no definitive announcements or decisions on that yet, but that’s something that they’ve been looking at for a long time.”
Mr Dorsett also responded to former Cabinet minister Leslie Miller’s proposal that fuel margins for wholesalers and retailers be reduced until gasoline prices fall to $6.50 per gallon, dismissing the suggestion as “nonsense”.
Mr Dorsett argued that the economics of fuel retailing were being overlooked, with operators facing sharply higher inventory costs while earning a largely fixed amount per gallon sold. “When gas was $3 a gallon, I was making 76 cents. Gas is now $7 a gallon. I’m still making 76 cents,” he said.
Mr Dorsett supplied Tribune Business with a fuel price breakdown for New Providence as at October 20, showing average gasoline prices of $7.52 per gallon and diesel prices of $8.12.
The breakdown shows that Government taxes account for $1.89, or 25.1 percent, of the gasoline price, while the retailer’s margin is 76 cents and the wholesaler’s margin is 33 cents per gallon.
For diesel, Government taxes account for $1.95, or 24 percent, of the $8.12 average price. The retailer’s margin is 44 cents, while the wholesaler’s margin is 18 cents per gallon.
Mr Dorsett said the fixed nature of retailers’ margins meant that rising fuel prices do not translate into higher earnings, even as the amount of money required to purchase inventory increases substantially.
“Our margin is fixed. So what I’m saying is, right now, the Government is carrying home more than 76 cents in their 10 percent box,” he said, referring to VAT.
Mr Dorsett added that the cost of buying fuel has risen dramatically over the decades he has operated his business, increasing the amount of capital tied up in each delivery.
When he opened his service station in 1972, Mr Dorsett said, a 9,000-gallon delivery cost less than $5,000. Today, he pays more than $70,000 for the same quantity.
“I could buy a 9,000-gallon load of fuel for about less than $5,000,” he said. “Today I pay him close to $77,000 for the same 9,000 gallons of fuel.”
He argued that the higher cost of fuel also has implications for Business Licence fees, which he said are linked to gross turnover. As the nominal value of fuel sales increases, operators can face higher Business Licence costs even when their per gallon margins remain largely unchanged.
Mr Dorsett also complained about Business Licence audit requirements for businesses with turnover above $5m, saying an audit could cost around $20,000 and represent money that could otherwise be spent on staff or other operating expenses.
“Our Business Licence is based on the gross, so as the prices continue to go up, $7, $8 a gallon for fuel, what do you expect our gross to be? Our gross has doubled, so you double our Business Licence,” he said. “A fuel station ain’t no big business. It just handle a lot of cash. That’s all it is - a lot of cash.”
Mr Dorsett said he must cover his station’s operating expenses from margins of 76 cents per gallon of gas and 44 cents for diesel. “We’re making 76 cents on every gallon, not on every dollar,” he added.
He said he employs about 35 people and wants to keep them employed rather than move towards self-service operations, arguing that fuel price relief was important for businesses seeking to maintain jobs while coping with rising expenses.
The pressure on employers comes as the Government considers another increase in the national minimum wage.
Pia Glover-Rolle, minister of labour, public service and National Insurance, said last week that a further increase from the existing $260 per week was likely in the near future, as discussions continue around minimum wage policy and the establishment of a wage-setting council.
Mr Dorsett acknowledged that the existing minimum wage was insufficient for many workers facing higher living costs, but argued that increasing wages alone will not resolve the wider pressures facing businesses and households.
“I do agree that that ain’t no money for people to be living on the current minimum wage,” he said.
However, Mr Dorsett argued that employers were already contending with higher fuel costs and other expenses, making it necessary for the Government to address the wider cost of doing business alongside any wage increase.
He said he viewed a minimum wage increase as only partial relief for workers rather than a solution to the underlying cost-of-living problem. “A minimum wage increase right now is only trying to ease the pain on some people’s head,” Mr Dorsett said.
He added that higher fuel prices are also reducing consumers’ ability to meet household expenses, including food and rent, and called for the Government to take action to ease the pressure on both businesses and ordinary Bahamians.