The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Hotel and Tourism Association’s (BHTA) president last night hailed the government’s bid to extract an extract $31m from the vacation rental market as “levelling the playing field”.

Robert Sands told Tribune Business that the Minnis administration’s VAT crackdown was “long overdue” as it will ensure the 12 percent levy is charged on the actual rent paid by visitors as well as the commissions paid to online marketplaces such as Airbnb.

The BHTA chief spoke out after the prime minister revealed that the government is changing the VAT Act to make absolutely clear to Airbnb and its competitors that taxes must be levied “on the full value of the rental”.

Describing the move as part of efforts to achieve “greater equity in government taxation”, Dr Hubert Minnis said: “This means taking steps toward standardising taxation in such a way that all parties pay their fair share, and that all businesses can compete on a level playing field.

“My administration has made several statements regarding the untapped potential of the vacation homes market and the millions of tax dollars that go uncollected each year. We are amending the law to clarify that all vacation home marketplaces, such as AirBnB and VRBO, are required to pay VAT on rentals and commissions.

“Those marketplaces who are charging VAT presently have interpreted the legislation as being only applicable to the commissions paid out. The clarification in the law will make it explicit: VAT will be applicable on the full value of the rental,” he added.

“By amending the requirements from the vacation home rental market as mentioned, we estimate $31m in increased government revenue.” Mr Sands reaffirmed yesterday that the hotel industry has long been calling for such a taxation “level playing field” between itself and the vacation rental market, which grew rapidly pre-COVID-19 and is likely to resume that trajectory afterwards.

“I think we welcome the Government’s proposal to level the playing field,” he told this newspaper. “We think this will go a long way in generating incremental income for the Government as well, and it will also create opportunities for the Government to have additional funds available for the tourism sector in terms of airlift support and marketing for tourism’s consolidation and rebound.

“This is long overdue. We’re aware taxes were already paid on commission, but on commission and the cost of stay is welcome news. This is a position our sector has advocated for the past four to five years, and it’s welcome news for us.”

The vacation rental market has long been viewed as a source of increasing local entrepreneurship, and for giving Bahamians a greater ownership stake in the country’s largest industry, tourism. One vacation rental owner yesterday told Tribune Business he was less than impressed by the Government’s tax grab.

“They can’t seem to let that one go,” Bruce Raine said. “With all these things, the people that pay the tax are the people at the bottom. What’s going to happen is that we’re competing with other markets for tourists. If the Airbnb guest has to pay another 12 percent on the full value, we can either try and get a higher price or suck it up and bear it ourselves.

“It makes it more expensive for the guest, and we’re not the only place that has this. We have Cayman, Turks & Caicos, and they are a lot cheaper all around than we are in my view. It’s always the small people that get crushed.  There are some wealthy owners, but most are low end from $70 up to $200 per night. You add $24 on to $200, and all of a sudden you’re at $225, and we’re already expensive.”

Dr Minnis yesterday indicated that vacation rentals are making a stronger recovery than many other tourism industry segments, saying: “On the property front, short-term rentals in the Airbnb market have already shown signs of rebound since the careful reopening of our tourism sector in November.

“Occupancy rates have more than doubled, from 8.2 percent in November 2020 to 16.6 percent in March 2021. At the same time, there was a 2 percent increase in average daily rental rates and a 52 percent increase in room reservations.

“Based on Central Bank data for the period end-March 2021, vacation home rentals and comparable hotel listings increased by 65.9 percent and 55.4 percent, respectively. This also impacted average daily room rates which similarly increased by 10.8 and 7.5 percent to $497.95 and $169.36 for vacation home rentals and hotel listings, respectively.”

Among other tax measures unveiled yesterday, the Government is increasing the Excise Tax rate paid on cheroots and cigarillos to 220 percent, or 50 cents per stick, to bring them in line with that of conventional cigars.

“We are also amending the VAT Act to assist businesses who tend to remain in a habitual credit position with the Department of Inland Revenue due to the nature of their business,” Dr Minnis added.

“We are codifying provisions that, up to now, had just been VAT rules and which permit appropriate accounting treatments to be used to address VAT liabilities without putting businesses in an unsustainable cash flow deficit.

“This will avoid the situation where some groups of businesses have to put out substantial amounts of cash even when they are in a credit position, only to have to wait for a refund from the Department of Inland Revenue.”

As for real property tax, he added that some 14,000 properties have been added to the tax roll, which has “increased the value of taxable properties by $9bn. This will translate into some anticipated $14m in increased real property tax revenue”.