The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

FAMILY Island resort/hotel operators yesterday expressed serious concern that a 15 per cent Value-Added Tax (VAT) on domestic aviation would increase access costs and drive away visitors, one describing the move as “suicide”.

And they added that the proposed end of the “2 Fly Free” air fare promotion, which will coincide with VAT’s July 1, 2014, imp-lementation would likely only worsen the impact.

Molly McIntosh, assistant general manager with responsibility for sales at Abaco’s Green Turtle Club, said: “I know that many other hoteliers in the Family Islands depend totally on flights from Nassau to get their guests to their resorts, and this will impact them.

We are very fortunate to have Ministry of Tourism’s ‘2 Fly Free’ Promotion in place and that will help with any increases in the cost of the flight, but that promotion ends in June 2014 just as VAT is scheduled to start.”

Ms McIntosh added: “The VAT charge on domestic aviation will hurt our domestic tourism product that we were just beginning to really build. But it will not impact the Green Turtle Club as much, as most of our guests come through Florida.

“We would love to use Nassau-Abaco flights with people getting good pricing on flights to Nassau from the States, but connection times and very limited flights into TCB make it difficult for us to send our potential customers on that route. If they fly into Marsh Harbour they have an additional charge over and above the cost of the airfare, of up to $340 round-trip for taxi and ferry charges not including any tips. Will VAT be charged on taxi fares?”

The recently-released draft VAT Bill and regulations confirm that domestic aviation will be subject to the 15 per cent VAT, and not treated ‘exempt’. This means that VAT will be levied at the full 15 per cent rate on passenger ticket prices on inter-Bahamas routes, meaning all flights between Nassau and the Family Islands.

This will increase costs to tourists transiting Nassau to their final destination, and for Bahamians travelling to and from the Family Islands.

Ms McIntosh said she felt taxing domestic aviation would not have nearly as much impact as other features of the VAT legislation. “The BEC part will be huge; those costs to us are already crippling,” she added.

“Having to raise prices at a point when we were finally catching back up, with tourism making a slow but steady climb in Abaco and on Green Turtle Cay, just will stagnate our progress.

“The Green Turtle Club has everything in place; we have a well-trained, professional, yet very friendly staff, well-manicured grounds, new docking facilities with more deep water slips and access, upgraded rooms and excellent food,” Ms McIntosh said.

“We have a good reputation and are well-positioned for events and growth. Most of our staff is from Abaco or Grand Bahama, and have been here an average of nine years, with some staff over the 30-year mark. The Green Turtle Club has to be able to sustain itself, and we cannot continue to do business unless we are able to make enough of a profit to keep the shine on the product.”

Bahamian businesses are likely to be able to ‘net off’ VAT paid on electricity bills against that paid on their sales, as it will likely be treated as an input.

Meanwhile, Leslie Kennedy, owner of the Pigeon Cay Beach Club on Cat Island, told Tribune Business, “I believe that the Out Island Promotion Board and the Bahamas Hotel Association is on top of this issue.

“It is certainly a concern. If they continue the Fly Free programme for locals and tourists coming in from abroad, and they want to tax it, I guess it’s fine because they get a free flight anyway.

“There has been talk of that being cancelled. If they take that away from us and add an additional tax, then we will lose visitors. Our visitor numbers will go down tremendously. I’m opposed to adding VAT on travel. The cost of travel to the islands is already very high.”

Jeffrey Birch, owner and operator of the Small Hope Bay Lodge in Andros, said: “To increase anything on our visitors is suicide, in my opinion. We compete in a very competitive market and the Government must help the Out Islands, especially if they want their own citizens to develop and keep a little piece of the tourism pie, which it seems is all we are getting now.

“To increase costs that have to be passed on to the tourists would be very difficult for tourism to swallow, and to convince the tourist they should come here and not some other destination.”

Robert Meister, president of Treasure Cay Ltd, said: “Airlift is very difficult for many of the Out Island destinations. It is more costly to get to the Family Islands than some of the other countries that offer sun, sand and sea.

“It’s not good for the Family Islands to have an increase in fares when we are looking for the opposite and trying to get lower fares and more airlift. We have to remain competitive or people will simply look to spend their money elsewhere.”