The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

SuperClubs Breezes owner has called on the Government to treat tourism as an export industry for Value-Added Tax (VAT) purposes, adding that Nassau and the Bahamas would “see a real uptick” in the economy by 2015.

John Issa, in an interview with Tribune Business, added his voice to others in the hotel/tourism industry that have called for the sector to be classified as an exporter under VAT.

This would allow the country largest industry, estimated by the Bahamas Hotel and Tourism Association (BHTA) to be responsible for the employment of 108.000 Bahamians, to be ‘zero rated’ for VAT purposes.

Such status would give the tourism and hotel sector a tax break ‘at both ends’, enabling it to both avoid levying VAT on its customers and claim back the tax payments on its inputs.

“A lot of it depends on how it treats the hotel industry,” Mr Issa told this newspaper on VAT’s likely impact. “We already pay a substantial sales tax on rooms. If it’s added on to that, it will be very difficult.”

The Government’s original VAT proposal called for a lower 10 per cent rate to be levied on hotel rooms and food and beverage, and allayed Mr Issa’s fears by stating that it would replace the existing 10 per cent room occupancy tax.

The 10 per cent rate, while lower than the standard 15 per cent VAT rate, would still have equalled the highest rate levied on the tourism industry anywhere in the world for this particular tax.

With the Government having publicly stated that VAT will now be implemented at a rate lower than 15 per cent, likely either 10 per cent or 7.5 per cent, it remains to be seen what the hotel/tourism industry’s new rate will be.

Mr Issa, though, suggested that the Bahamas treat tourism as an export industry, with ‘zero rated’ VAT benefits, to maintain its global price competitiveness.

“It’s [tourism] an export industry, and no one has put VAT on an export industry,” he told Tribune Business. “Hopefully, it’ll [the Government] recognise the export industries, as we need to export more from the Bahamas.”

Mr Issa’s comments back the BHTA’s call for tour packages sold abroad by travel agents and other wholesalers to be ‘zero rated’, in order to avoid a taxation ‘double whammy’ and maintain the Bahamas’ price competitiveness.

The Government’s initial VAT proposal only treated exports as ‘zero rated’, and some are likely to question whether the hotel and tourism industry should be treated in such a manner, since carving out the economy’s largest sector would impose a greater tax burden on others.

And the New Zealand government consultants, who visited the Bahamas recently, urged the Government to keep the number of VAT exemptions and zero ratings to a minimum, in order to keep the rate as low as possible.

Mr Issa, meanwhile, sald it would not be long before New Providence felt the benefit from a multitude of hotel and foreign direct investment (FDI) projects either underway or in the pipeline.

Apart from the Albany expansion and $2.6 billion Baha Mar project, Mr Issa pointed to Melia’s branding of the former Sheraton property; Warwick International’s upcoming renovation of the Paradise Island Harbour Resort; and the Nassau Palm’s transformation into a Marriott Courtyard property as reasons for optimism.

“Our prosperity depends on the prosperity of the developed world, the rest of the world,” Mr Issa said, “and with the Chinese connection to Baha Mar, hopefully one day we will have flights come direct or with one-stop.

“There are a lot of good signs for the future of the Bahamas and Nassau, but I don’t think we’ll see a real uptick until next year.”

Adding that “one day something will happen at South Ocean”, Mr Issa expressed hope that an improving world economy would create increased travel demand and translate into better room rates, enabling Atlantis to cease price discounting.

“Hopefully when things pick up we won’t have Atlantis discounting prices as much as they have,” he told Tribune Business, “because it affects everyone since it’s such a large property. They deserve better rates.”

Mr Issa added that, in particular, the Marriott Courtyard’s appearance would “revive that whole area” of West Bay Street. This will add to the improvements by the British Colonial Hilton and the FML Group’s headquarters, with other property redevelopment projects also underway.

“Something has to happen on East Bay Street,” Mr Issa said in a nod to the downtown Nassau redevelopment project. “That’s a huge opportunity waiting to happen.”

Disclosing that he was always looking for new investments, both inside and outside the tourism industry, in the Bahamas, the Breezes owner also urged this nation to set partisan politics aside when it came to key decisions.

“There are certain areas of the economy, and certain areas of the social strata, that should transcend partisan politics because they’re in everyone’s interests,” Mr Issa said.

“There are some major matters, even if done behind the scenes, where there should be consensus.”

He identified Atlantis, Baha Mar and the Lynden Pindling International Airport (LPIA) upgrade as examples of such issues.

“They eventually get sorted out,” Mr Issa said. “This is a problem all democracies have, but still give me the democracy.”