The Tribune

• But marina chief more fearful for ‘bread and butter’

• Small local providers struggling to ‘make ends meet’

• December ‘ghost town’ after yacht charter tax levied

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Atlantis has suffered a 20-25 percent fall in large vessel volumes since VAT’s imposition on charter fees, its marina dockmaster has revealed, with the decline “definitely hurting the small man” more.

Obiama Knowles told Tribune Business he is more worried about the impact on “bread and butter” Bahamian service providers from the boating traffic fall-off than the hit the marina industry itself has taken after the tax rate on foreign charters was more than tripled in the May 2022 Budget.

Speaking in a recent interview, he revealed that day workers who clean both the interior and exterior of visiting vessels; mechanics; laundry providers; provisioners; limousine drivers and even florists were all complaining that “things aren’t like they used to be” when it comes to earnings from the boating industry. Some entrepreneurs who have established businesses to cater to the industry are now “having to go back to alternative businesses to make ends meet”.

VAT’s imposition, when added to the already-existing 4 percent fee levied by the Port Department, took the combined tax rate facing foreign charters to 14 percent with effect from July 1 last year, and Mr Knowles said the impact was especially evident in the weeks leading up to Christmas 2022 when the Atlantis marina become “a ghost town”.

The Association of Bahamas Marinas (ABM) has called on the Government to consolidate the two levies into one given that the main objections from boat captains and yacht brokers relate to the process involved in paying the VAT, and having to make two separate payments, rather than taxation increase itself.

Mr Knowles said some in the sector had indicated they would accept a combined 10 percent tax rate, but the Government - despite suggestions it might remove the VAT from yacht charter fees in this year’s Budget - has maintained the structure imposed in 2022. The Atlantis dockmaster also voiced disquiet that the online portal set-up by the ABM at its own expense to facilitate seamless payment of due fees by its clients was “taken away” by the Government.

VAT’s imposition on yacht charter fees sparked confusion in the months immediately following its July 2022 introduction. “There was quite a bit of scare and frustration that came into the industry,” Mr Knowles recalled to Tribune Business. “I used to work as a yacht agent, and I had a lot of brokers reach out to me asking how does this work, why are they [the Government] doing this now, how do we pay it?

“Of course, at that point in time, we had absolutely no answers for them because we were just as surprised and shocked as anyone else. After that, as members of the Association (ABM) and Yacht Brokers Association, we reached out to the Department of Inland Revenue for clarity.”

The Government’s major tax collection agency, though, initially appeared equally as uncertain about how the collection of VAT on yacht charter fees would work in practice. “Initially, the Department of Inland Revenue did not give us a lot of answers as well,” Mr Knowles added.

“When we went back to them a few more times, they were more so trying to pick our brains to ask what sort of things our business does. How do yacht agencies operate? It just seemed from the conversation that they were going after every little bit of money they could. They wanted to know our business model, how we helped clients, how we billed clients.”

Mr Knowles said the true fall-out from the increased taxation first became apparent as the 2022 winter boating season approached. Traditionally, following the Fort Lauderdale Boat Show, many boats head to The Bahamas to begin the winter charter and cruising season but that did not happen last year.

“November started off sluggish,” he added. “When I spoke to the brokers, they said their clients - and brokers as well - had taken offence to comments that those rich people on yachts can afford to pay it. They were not getting the number of bookings for The Bahamas that they normally get, and were actually selling other regions like the Caribbean.

“For myself, November 2022 was not too bad, but December was deplorable. Thanksgiving is generally mostly owners using their boats. After Thanksgiving, Atlantis essentially became a ghost town until the week before Christmas. That was not normal. We would have at least something to carry us through the beginning part of December.”

Mr Knowles said Chester Cooper, deputy prime minister and minister of tourism, investments and aviation, together with John Pinder, the Ministry of Tourism’s parliamentary secretary, were both informed in early December 2022 by the marinas of the negative boating industry reaction to the taxation increase. Despite suggestions that the charter fee VAT may be repealed in the run-up to the 2023-2024 Budget, it has remained in place.

While a strong Christmas 2022 helped Atlantis “come close” to its targeted marina performance for the year-end, its marina dockmaster said “something felt off” come February 2023 despite relatively good bookings post-Christmas. “The size of the yachts, the 80-200 footers, they just didn’t seem to be there,” Mr Knowles said.

“I know from talking to a number of captains, some of whom had been coming to The Bahamas for 15-20 years, they said they had got more requests for the Caribbean. We would normally see them continuing to visit The Bahamas beyond Spring. It felt off. We were still able to make up the numbers where we could, but it did not feel the same.

“I spoke to a number of yacht brokers at the time, and they said the Caribbean was being pushed more strongly because of the uncertainty around the VAT and how payment was to be made. They asked why the Government did not simply increase the charter fee so that one fee is being paid, as they have been accustomed to paying that and they know how easy it is to do that.”

The Government’s response was that yacht brokers should complete the VAT-related paperwork, but Mr Knowles said both they and boat captains “do not want to bear the burden of that” and pass additional costs on to their charter clients. “These are rich folks who could afford it, but no one wants to be told that because they are rich they can afford this,” he added.

The drop-off in boating business has continued to this day. While conceding that Atlantis is faring better than most, due to the pull of its water park, aquarium and various other amenities, Mr Knowles told Tribune Business: “For me especially, as someone who used to work with a lot of large boats, I like to be able to fill the marina with large boats. The numbers for large vessels just aren’t there.

“We’re still getting 110-160 footers, but those 180, 190 and 200-plus footers, we’re not seeing many of them. I would say we’re maybe about 20-25 percent down. Oddly enough, Khaalis [Rolle] from Hurricane Hole reached out to me a couple of months ago saying ‘You guys look pretty busy over there, but I don’t have the same business in my marina’. The other marinas maybe don’t have the attractions we have to offer, so they have seen a dip.

“I look at Bay Street Marina, Hurricane Hole and Nassau Yacht Haven, and you can see that they are down.” However, Mr Knowles said his main concern is not for the marina industry but all the businesses, staff and self-employed workers who provide services to the boating industry.

“I also speak to a lot of the day workers, laundry people, provisioners, limousine guys and florists that I dealt with as a port agent,” he revealed. “They said the same thing. The numbers just aren’t there and they are not getting the same rewards for their services. That’s the bread and butter of our economy.

“A lot of people think the marinas only care about filling the marinas. Of course there are companies we work for that we try and do our best to make money for, but we also allow and contact other providers to assist the boats with services the marinas don’t offer.

“To hear the little guys say they are not getting as much as they made in past years for the services they offer, that means they cannot buy things for their home. This industry drives a lot of the economy,” Mr Knowles added. “It’s definitely hurting the small man, regular guys working around the marina, local workers now sitting around with nothing to do.

“There are people who voice opinions that boats come here and we don’t gain anything from them being here because they come with provisions. But, if a boat stays in The Bahamas chartering for an extended period, when they go to Solomon’s or Super Value and see someone with five to six trolleys, that is someone who has come off a yacht.

“The grocery store makes money, the packing boy makes more money than from a local, The provisioners take the burden of shopping off the boats and make money. It’s a trickle down effect. We have day workers washing down the boats, interior workers cleaning the inside. If the number of boats drops off, it means they’re not being called out. I know a number of ladies who have established businesses as stewardesses, and they’re not getting as many calls.”

Mr Knowles said he knew of several persons who had started their own businesses catering to visiting boats post-COVID, and added: “All of these people are seeing a decrease in business. I’ve spoken to a number of people who have said things aren’t as they used to be. I have someone reach out to me every month to say ‘hi’ and make sure that if I know of anything I refer them to her. There’s a couple of them.

“They are struggling to figure out how to present themselves a bit better to people or find alternative means of work. Even though they enjoy being in this business, they have to go back to an alternative business to make ends meet.”