The Tribune

• Foreign charters ‘hesitant’ to use Bahamas

• No way to reclaim VAT on in-country spend

• But total boating arrivals up 8% at near-100k

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Marinas are warning the “hesitancy” of foreign yacht charters to consider The Bahamas because of its status as a VAT “outlier” has caused a 20-25 percent business drop-off for some properties.

Marques Williams, the Association of Bahamas Marinas (ABM) president, told Tribune Business the sector is shying away from this nation because the 10 percent VAT imposed on all yacht charter fees in the 2022-2023 Budget is “not working as they are accustomed to it working”.

Apart from its imposition more than tripling the tax rate facing foreign yacht charters, taking it to 14 percent when combined with the Port Department’s 4 percent fee, The Bahamas - unlike Europe and other major yachting destinations - has no mechanism in place that allows boats to reclaim the VAT they pay on in-country purchases such as goods and cleaning/maintenance services.

Businesses typically ‘net off’, or recover VAT paid on their inputs against what is charged to, and collected from, their end customers. However, Mr Williams confirmed that foreign charters have no way at present to do this in The Bahamas, and are thus faced with an across-the-board 10 percent increase in the cost of in-country purchases as well as the levy now imposed on the charter fee paid by clients.

However, the foreign yacht charter sector is just one niche of the overall boating market. Mr Williams said all other segments have been “moving on up” to create “a nice little offset”, with total boating and yachting visitors for the ten months to end-October 2023 increasing by 8 percent year-over-year to just under 100,000.

Data presented by the ABM at last week’s Bahamas Hotel and Tourism Association (BHTA) meeting revealed this nation attracted 99,422 boating and yachting visitors during that period compared to more than 92,000 arrivals during the same period in 2022.

However, Peter Maury, a past ABM president, told Tribune Business that the increased foreign yacht charter taxation and subsequent uncertainty had blunted the marina sector’s impact and prevented it from providing an even greater boost to the Bahamian economy.

Asserting that foreign yacht charter guests are typically the highest-spending boating visitors, and circulate this the most through visiting multiple Bahamian islands, he echoed the concerns expressed last week by the Bahamas Yacht Brokers Association by revealing that marinas have suffered an up to 20-25 percent decline in visiting boat volumes.

With the brokers describing bookings for the remainder or the winter season through to end-April 2024 as “dismal”, Mr Williams conceded that VAT’s imposition on foreign yacht charter fees - and the resulting uncertainty over how the tax works - has impacted the industry.

Pointing out that some marinas are more impacted than others, with properties in the islands of Abaco and Bimini “doing well”, he added that foreign yacht charters “being able to recoup the VAT” on Bahamian purchases when they leave this nation remains an issue.

“In other countries when VAT is used, typically when they’re leaving they get reimbursed for VAT,” Mr Williams told Tribune Business. “We don’t have that mechanism here. It’s not here. They know how VAT is supposed to work. They feel that they are not only paying VAT, but VAT is not working as they are accustomed to it working.

“That creates an issue with our customers with regards to that. It’s giving them a lot of anxiety, and the brokers are not able to overcome that. The information is not clear, and being able to communicate that to clients is difficult.

“For sure it’s a bit unclear, so we are an outlier when it comes to that. VAT is done in Europe on the yachting industry, so they have a process for how that works and how they reclaim the VAT. It doesn’t work that way here. Ours is a bit unclear, and they don’t feel it is a fair system. There’s a lot of confusion in it, and these reasons are why they are hesitant to come down here with foreign yacht charters.”

The ABM acknowledged this in its report at the BHTA AGM, saying: “The initial response from the industry was not positive. Marina members and stakeholders felt the initial reactions of declining charter yacht visits. The ABM presented concerns to the Government with data from marinas showing the reduction of charter yachts from the previous year.”

VAT’s imposition, and the structure unveiled in the 2022-2023 Budget remain in effect. The Government’s strategy was that those using The Bahamas’ waters and environment for their own economic benefit should contribute more to its protection, especially since it has long been felt that foreign charters evade the Port Department’s 4 percent fee, as well as creating a tax level playing field with local tour operators.

However, Mr Maury questioned “at what point will the Government start listening” after the Yacht Brokers Association raised similar concerns to those long voiced by the ABM when it comes to yacht charter fees.

Revealing his recent discussions with representatives of the American Charter Yacht Association, who are attending an industry event in Antigua, the former ABM president said: “They asked me if there’s going to be any changes here. I said not that we know of. We were hoping the Government would see the decline in charters and do something about it.

“The charter brokers, if they’re looking on the industry’s MLS (Multiple Listing System), can see there’s very little activity in The Bahamas. It’s down from previous years. The fact these guys, the Bahamas Charter Yacht Association, are saying it, the yachts are saying it, the American Charter Yacht Association is saying it, the International Charter Yacht Association is saying it, I don’t know at what point the Government starts to listen.

“If Thanksgiving was any indication of 2024, it’s pretty pathetic. We were not even close as far as boats to what we had the previous year. It was slow and last year wasn’t that great. It’s off 20-25 percent. The charter boats are significant.”

Mr Maury said Bahamian marinas are feeling the impact in different ways. “The problem is most people book out the season,” he explained. “The feedback we’re getting is that charters offset a lot of the expense for clients. I had a guy who said that if he doesn’t pick up some charter business he’s leaving. They’re just going to leave. It’s cheaper to go back to Florida than stay in The Bahamas.

“When they want to come over, they take the boat here and it is paid for by charters. They have a couple of charters for Christmas and New Year, but if they don’t start booking for March and Spring they will put the boat back to Florida. It becomes too expensive to pay utility bills, crew bills and other bills that they get.

“To me, it’s common sense,” Mr Maury added. “The Government says these are rich guys, they can pay for it. But they’ve decided not to. This theory that we can charge them anything and they’ll suck it up. No. These guys want value.

“If they feel they can get better value, they’ll go to the Caribbean. It doesn’t matter how great our waters are. At some point it’s the opportunity cost; basic lesson of economics. The experience does not match the cost, so they will go somewhere else. Right now, the general consensus is the Caribbean is getting significantly more charters than we are.

“The whole Bahamas relies on foreign yachts. They travel all around, going to Exuma, Abaco. It’s all part of the charter business. When you take that part away, that’s the most economic part of the marina and yachting industry. The yachts that do charters spend the most amount of money in the country, bring the most people into the country. The economic impact is significant.”

Bahamian yacht brokers last week warned charter bookings for the peak winter season are “dismal” with the sector “almost at a standstill” due to VAT’s imposition and lack of clarity on how it works.

A Bahamas Yacht Brokers Association (BYBA) spokesperson told Tribune Business the drastic fall-off is not only impacting themselves and local marinas, with the brunt of the impact being felt by small providers and entrepreneurs who provide cleaning, maintenance and other services to visiting yachts.