The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Tax Coalition co-chair has expressed concern that Value-Added Tax (VAT) could make Bahamian tour/dive boat operators and charter companies uncompetitive against international rivals and “put them out of business”.

Robert Myers told Tribune Business that the issue of ‘exportable’ services, which can be provided across borders, had been raised at last week’s Coalition for Responsible Taxation meeting by the Marina Operators of the Bahamas (MOB) and others.

The main concern, he explained, was that US-based boats/charter operators could easily come into the Bahamas and provide the same services as locally-based companies, thereby competing directly for tourist business.

Mr Myers said there were significant questions over whether the Bahamas would be able to levy 7.5 per cent VAT on these foreign operators, especially since the Government already had difficulty in enforcing the 4 per cent charter fee tax imposed on foreign liveaboards.

If VAT was imposed on Bahamian-based operators, but not their foreign rivals, this would give the latter an immediate price advantage. Foreign tourists, spotting this, would flock to booking with the overseas rivals, thus potentially threatening the local companies’ existence and hundreds of Bahamian jobs.

“We can’t make Bahamian businesses less competitive than their foreign counterparts,” Mr Myers told Tribune Business.

“If you’re imposing VAT on Bahamian companies that go out there and organise dive tours, but American boats come in and pay none, you’re putting that Bahamian company out of business.”

“It’s the same with the charter companies,” he added. “You will put the Bahamian charter company out of business. Why would anyone book their services if they are 7.5 per cent higher?”

Mr Myers questioned whether the Bahamian tour/dive boat and charter company sector should be paying VAT, given that their services were effectively ‘exported’ to foreign tourists.

However, given that the activity or ‘point of consumption’ is in the Bahamas, this argument is unlikely to cut much ice with a government that is desperate for every cent of revenue it can lay its hands on. The wider hotel/tourism industry has already advanced this, and made little progress.

“The problem is where a service can move across borders, like dive boats and charter operations,” Mr Myers told Tribune Business. “Because the goods and services are transportable, tourists will book the tours over there, and boats and planes coming in are going to disadvantage those charter companies.

“They’re significant concerns to the private sector, as you will put boat charters, airplanes, shipping and dive boats out of business.”

The Tax Coalition co-chair said it would be virtually impossible to levy VAT on foreign operators when they were outside the Bahamas, while the Government had a poor enforcement track record in catching them while in the jurisdiction for taxes already due.

“If you charge that company VAT coming across the border, you will have all kinds of problems,” Mr Myers said. “If that charter boat comes in, how are you going to enforce that?

“They’re [the Government] not collecting that 4 per cent charter fee now. If you’re going to force every dive boat to show they’re paying VAT on the service, you’ve got to have cross-border agreement to be able to look into their books. They should be VAT registrants, but good luck with that.”

Stuart Cove, head of Stuart Cove’s Dive Bahamas, previously told Tribune Business that adding VAT to consumer prices would deepen the existing gulf between local operators and their “foreign and illegal” rivals, who already enjoy a major competitive advantage.

Pointing out the Government would likely find it impossible to force these operators to levy, collect and remit VAT to it, Mr Cove - speaking when VAT was proposed at 15 per cent - said many foreign operators were evading the existing taxes levied on the sector.

Estimating that non-existent enforcement and collection efforts were costing the Government around $1 million per annum, he told Tribune Business that multi-million dollar revenue sums were simply “being left on the table”.

If foreign operators were taxed on the same basis as their Bahamas-based counterparts, Mr Cove said, the Government would likely quadruple its annual tax take to $4 million.