The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian hotel and tourism industry has failed to maintain Grand Bahama’s concessionary 5 per cent room rate post-Value Added Tax (VAT) implementation, as it “continues to work” on other concerns.

The Bahamas Hotel and Tourism Association (BHTA), in its December annual general meeting (AGM) report to members, confirmed it had been “unsuccessful in the appeal for maintaining Grand Bahama’s room rate at 5 per cent”.

This rate had been in effect since 2012 as part of a five-year initiative designed to revive Grand Bahama’s flagging tourism and hotel product.

Now, with VAT’s introduction, not only will a higher 7.5 per cent output tax be assessed on Grand Bahama hotel rooms, but the base has been broadened to include food and beverage (F&B) and other parts of the hotel product.

The Ministry of Finance, in a December 2014 communication to the BHTA, confirmed: “The VAT regime is uniform. Output VAT will be assessed at 7.5 per cent on accommodations and all other supplies made by Grand Bahama hotels.

“No differential VAT treatment will apply relative to the rest of the Bahamas.”

Stuart Bowe, the BHTA’s president, had previously told Tribune Business of the organisation’s concerns should the Government stick by the position it has now confirmed.

“BHTA maintains that Grand Bahama hotels, which have been eligible to assess a 5 per cent room tax since 2012 as part of a five-year targeted stimulus package, should be permitted to assess the same 5 per cent on the room portion of their VAT, versus the planned increase of 7.5 per cent,” he said

“Their price advantage will be eroded with this increase due to the broadening of the tax footprint for all hotels. Food, beverages, and other services which were previously not taxed on the end user will be.”

The BHTA’s December AGM presentation, meanwhile, also reiterated that the Government had yet to translate into action the need to ensure equal VAT treatment for foreign dive/charter boat operators and vacation home renters.

“Government recognises the need to improve collections from charter operators and vacation home renters to ensure parity for local businesses, who could be disadvantaged from a price competitive point of view,” the AGM presentation said.

“BHTA offers to support plans to do so. No concrete movement yet, efforts ongoing.

Mr Bowe also previously outlined the industry’s concerns in this area, telling this newspaper: “Domestic operators are disadvantaged, paying considerably higher taxes than the 4 per cent, which is supposed to be assessed against foreign operators who contribute significantly less to the local economy.

“Presently, there is a need for greater enforcement as well on the collection of the 4 per cent. BHTA is calling for parity and equal enforcement.”

Revenue leakage from the several hundred vacation rental homes that, with turnovers under $100,000 annually, will not have to register and pay VAT, is another major concern.

These properties were previously paying the 10 per cent room tax that has been eliminated by VAT, essentially resulting in them becoming un-taxed. This, the Coalition for Responsible Taxation argued in a previous position paper, will give them a major competitive advantage over Family Island resorts that will be levying VAT.

“Unless the rental home’s revenue exceeds $100,000 per year, they are not subject to register for VAT,” the Coalition, of which the BHTA is a member, warned. “Several hundred vacation rental homes are presently paying a 10 per cent room tax and will not be required to pay anything when VAT is in effect, as they don’t pass the threshold.

“This creates revenue leakage and lack of fair play with licensed hotels, particularly small operators in the Family Islands.

“This needs to be reviewed and revised. In all fairness to the industry and Government, the threshold and enforcement approach for this sector should be reconsidered.”

The Government, though, appears to have towards the industry’s position on the VAT treatment of hotel casinos. While the sector was initially deemed ‘exempt’, meaning the 7.5 per cent levy would not be charged to patrons, it also ensured operators would be unable to recover their ‘input’ VAT payments.

Now, the Christie administration appears to have gone half-way to meeting the sector’s stance, which wanted the supply of rooms, meals and food and drink from the adjoining hotel, plus US-based marketing operations and electricity, to not attract VAT.

The Government, according to submissions to the BHTA and its AGM presentation, will only now apply VAT to casinos’ electricity supply. A VAT Rule to approve this is now required.

Elsewhere, the Government also moved the deadline after which VAT had to be levied on pre-booked business for 2015 to November 17, 2014, having initially set it at September 1. This, again, was closer to the BHTA’s preferred position of December 15, 2014.

And the Government has also agreed not to levy VAT on the ‘domestic leg’ of travel that is part of a continuous itinerary for tourists, and which originated outside the Bahamas.

“The domestic leg of a continuous itinerary which originates or terminates outside the Bahamas will be treated as international transportation where the travel is concluded within 48 hours of its initiation, but involves layovers,” the Ministry of Finance has communicated to the BHTA.

“The travel component will also be recognised as international for multiple destination itineraries that involve pre-booked ‘stopover hotel stay’ on multiple islands.”

Robert Sands, Baha Mar’s senior vice-president of government and external affairs, told Tribune Business in relation to the tourism industry and VAT: “We’re continuing to work on that. Everything is not totally resolved. We’re continuing to work on what’s outstanding.”