The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was last night told “don’t be a hog” over plans to increase tax earnings from the vacation rental sector, with property owners openly talking about forming an industry association to safeguard their interests.

Businessman Bruce Raine, who told Tribune Business he decided to quit the sector after it became clear the former Minnis administration was targeting it for extra revenue, said those owners he is in contact with feel they have to “fight back” after the Government launched a two-month drive for all to register their properties with the tax authorities.

“I’m in contact with over 100 local Bahamians who are in the business, and they are not happy, I can tell you that,” Mr Raine said of the Davis administration’s renewed push. “They’re talking about forming an alliance or a union because otherwise the Government will mow each one down.

“They’ve got to fight back. These are people who don’t have a lot of money. It’s ridiculous. They struggle doing a damn good job providing beds for people, and the Government wants a share of that. It’s just too much. Every nook and cranny, they’re going to continue to look for money. This will be their downfall. It will be how the Government gets out. It’ll put the vacation rentals out of business.

“A lot of them will be taking their places off the market. I know someone in Spanish Wells who will not advertise their place again.” The Government, since the Minnis administration’s term in office, has been eager to levy 10 percent VAT on the actual rental rate paid by the visitor rather than just tax the listing fee paid to the likes of Airbnb and VRBO as happens currently.

The Davis administration’s push for thousands of vacation rental owners to register their properties with the Department of Inland Revenue (DIR) marks the latest step in this effort. The tax authority, in a statement earlier this week, said the initiative was designed to ensure vacation rental properties pay their fair taxation share while also maintaining a high service standard for their guests.

Owners are being required to register their properties with it by April 30, 2023, via a newly-launched online portal. To incentivise registration compliance, the Government is dangling a variety of financial benefits such as a total exemption from 2023 Business Licence fees. Registration is being billed as free, and the initiative is also offering “free” promotion and the possibility to access financing via agencies such as the Small Business Development Centre (SBDC).

Kwasi Thompson, the Opposition’s finance spokesman, questioned why the Government wanted vacation rental owners to register their properties if they were earning less than $100,000 per year in revenue, which would put them below the threshold at which they must charge VAT and pay Business Licence fees.

“We want to understand the legal ability to force someone to register if they’re making less than $100,000,” Mr Thompson asked. “If you’re going to charge for Business Licences, say you will charge for Business Licences. Don’t do it in this secretive, roundabout way.”

Online exchanges on the Government’s plans show a largely negative reaction by vacation rental owners. One said: “Average Bahamians finally getting a piece of the tourism pie through ownership. Ya’ll know it wasn’t going to be long before this tax, tax, tax regime saw that. How else can they continue to increase the travel budget?” Another added: “Wiping out the middle class one tax at a time. Can’t catch a break for these humans.”

One chat thread saw several calls for vacation rental owners to form an association. “We need to form an association and stand up to them. My God, let the middle class live or the struggling taxpayers,” one said. Another added: “The first thing my lawyer said was: ‘You all need an association’.” One proposed name was the Association of Vacation Rental Hosts.

“Ladies and gents when can we meet? United we stand, united we fall,” one association advocate said. “We need to form the association first and meet with the Government, then take it from there,” another added. “If they going to tax us we need an agreement similar to hotels if not exactly like theirs,” a further proponent added.

There was also talk of exiting Airbnb vacation rental property listings. One said: “Seems like it’ll be best to have a website made and do direct bookings.” Another added: “Cheaper I advertise on the free platforms and exit Airbnb.” Reaction also suggested there was reluctance to comply with the Government’s registration drive, with one post asserting: “I won’t register. I’m almost sure they’re using that to crunch numbers and see how much money they can possibly make by taxing us.”

Mr Raine said the Government, in seeking its share of vacation rental activity, was likely to impact rental rates via the imposition of VAT and potentially make The Bahamas less competitive with rival destinations. “I really did not like it under the FNM,” he revealed of the Government’s direction. “The PLP say they are the party of the poor and downtrodden, but they’re not. They are making them downtrodden and poor.

“There are a lot of people who are unhappy and will probably not register their properties. The owners are saying we’ve got to organise, got to become a force to be reckoned with and to fight the Government. The Government wants to put their hands right into their cheque books when they struggle to make a dollar and want to keep it.

“I heard someone today say: ‘When is enough enough?’ You’ve got to do it in moderation. Don’t be a hog. Don’t be a pig. They need to rethink their strategy for balancing the Budget and the rest of it. It was the thin end of the wedge, VAT on the billing fee, and I could see where they were going to try and get what they want from it. I think other people will leave it alone. Nobody wants to work for the Government. They want to work for themselves.”

Bahamian vacation rental market indicators remain positive. ““In the short-term vacation rental market, data provided by AirDNA further cemented trends. Specifically, for the month of January, total room nights sold rose to 147,633 from 113,559 a year earlier,” the Central Bank said earlier this week.

“Underlying this outturn, the occupancy rates for both entire place and hotel comparable listings increased to 56.6 percent and 55.7 percent, respectively, compared to 50.8 percent and 47.9 percent in the prior year. Further, price indicators showed that, year-over-year, the average daily room rate (ADR) for entire place grew by 8.6 percent to $524.73 and hotel comparable listings by 4.9 percent to $186.54.”

Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business in a recent interview that the online portal has the ability to “go back several years” to collect data on the revenue, room rates and bookings that Bahamian vacation rental properties have enjoyed.

“We have identified close to 7,000 properties which are engaged in vacation rentals. The vast majority are in New Providence, Abaco, Exuma and Eleuthera,” he said. “The portal itself is very impressive in terms of the amount of information. We can go back several years to see what has been the take-up so that we can estimate revenue over the last two to five years.

“For some properties, we can go back to 2015. We can see what the room rates are over that time. We have a very nice tool which we think can help.” Mr Wilson said the revenue authorities were partnering with Avenu, a consultancy that works with state and local governments in the US and Canada to help them with tax administration, on the vacation rental initiative.