The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian hotel industry yesterday urged the Government to push the Value-Added Tax (VAT) implementation deadline back into 2015, warning this had to be got right first time to avoid “killing the goose that lays the golden egg”.

Robert Sands, Baha Mar’s senior vice-president of government and external affairs, told Tribune Business that the “incorrect” implementation of the new tax would damage the tourism industry’s global competitiveness and cause a potential market share loss.

And he disclosed that once ‘dynamic economic modelling’ of VAT’s likely economic impact was completed, the hotel sector was likely to recommend different rates - other than the 10 per cent for rooms and food and beverage sales, and general 15 per cent - for particular aspects of the sector.

Mr Sands was speaking after the Bahamas Hotel and Tourism Association (BHTA) yesterday released an update in which it warned that levying 15 per cent VAT on all non-room transactions “jeopardises our competitiveness”.

The document, which has been obtained by Tribune Business, revealed that the hotel/tourism industry had “expressed strong opposition” to the Government’s existing proposals on how it will implement VAT in certain areas.

It also joined Mr Sands in calling for the Government to delay VAT’s implementation, arguing that both the Government/Ministry of Finance and the public sector were not ready for the demands the new tax will impose.

“The industry is certainly concerned that tourism is the goose that lays the golden eggs in the Bahamas, and not doing VAT correctly the first time would jeopardise that,” Mr Sands told Tribune Business, emphasising he was not speaking for the BHTA.

“We would encourage the Government to listen closely to the sector’s position, and take all submissions into consideration before any final position is taken.”

Emphasising that the hotel and tourism industry was “not getting caught up so much” in debate over what the VAT rate should be, Mr Sands said its main concern was that the new tax “is not detrimental to tourism going forward”.

The BHTA update said it had been seeking data and information to conduct an analysis on VAT’s impact since last April, and had been “repeatedly told it would be forthcoming shortly”.

Effectively fingering the Government for delaying the data’s release, the BHTA said it was throwing in its lot with the Coalition for Responsible Taxation in collaborating on an economic assessment of VAT’s likely impact.

Mr Sands told Tribune Business that once satisfied with the results from dynamic economic modelling, the hotel/tourism sector “would like to propose certain levels of the [VAT] rate that might make it less difficult for the industry going forward”.

As the Bahamas’ largest private sector industry and employer, minimising tax reform’s negative impacts on the sector is vital, especially since it competes directly with global rivals and is already perceived as a high-priced destination.

“The whole idea is we believe tourism is the predominant element of the Bahamian economy, and while.... the Government must implement VAT, it must be done in such a way that allows Bahamian tourism to complete globally,” Mr Sands said, “and continues to bring in foreign currency inflows and be a major contributor to employment.”

The BHTA note was blunt on this issue, warning: “Assessing a VAT rate of 15 per cent on all non-room rate transactions for the industry, and on all other tourism-related services, jeopardises our competitiveness.

“We have expressed strong opposition to the imposition of VAT as is proposed on: resort levies (Promotion Board fees); gratuities and mandatory charges; restaurants outside of a hotel property; the food and beverage portion of business meetings and banquets; all tourism-related activities – diving, marinas, attractions, etc.”

Other key issues identified by the BHTA are how all-inclusive hotels will be treated under VAT, and the fact overseas tour operators, travel agents and others who take bookings for Bahamian vacations must levy the tax and remit it back to hotels in the Bahamas for payment to the Government.

The BHTA list also focused on the treatment of casinos and related expenses. With casino gambling to be treated as VAT ‘exempt’, hotels such as Atlantis and Baha Mar will only be able to reclaim, or ‘net off’, the tax paid on their inputs against their non-casino business.

When it was a public company, casino gaming accounted for around one-third of Atlantis’s revenues, meaning that under VAT it will only be able to reclaim two-thirds of its input tax payments. And, given its casino-centric model, Baha Mar would likely be able to reclaim even less.

Acknowledging that the Government faced “a difficult balancing act” on fiscal reform, Mr Sands told Tribune Business: “We want to get it right at the beginning, as you only get one bite at this apple.

“We don’t want to implement VAT incorrectly, or wrongly; we have to get it right from the start.”

Asked what would happen if the Bahamas did indeed get it wrong, Mr Sands replied: “We don’t want to find out. We want to ensure we continue to improve and grow. We don’t want to fail as an industry or lose market share.”

The Bahamian hotel and tourism industry, he added, was seeking adequate time to assess, review and train its staff for VAT implementation, and did not want the tax brought in “prematurely”.

Calling on the Government to build consensus, Mr Sands told Tribune Business that the industry needed “as much time as possible” to implement VAT properly.

“From our perspective, an industry perspective, any date in 2015 would be acceptable,” he confirmed of VAT implementation.

The BHTA also called for delay, “citing the lack of readiness by both the public and private sectors, and the many concerns about the economic impact of what has been proposed thus far and a lack of resolution to unresolved matters”

The industry also wants “an equitable situation between Bahamian-based tour and attraction-related businesses and foreign operators (cruise lines, dive packages, spring break operators, foreign private yacht charters and commercial foreign yacht industry)”.