The Tribune

• Ex-ABM president blames imposition for 20% revenue fall

• Says Bahamas 'shot ourselves in foot' with taxation tripling

• Adds: 'We cannot tax them if vessels are not in country'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Association of Bahamas Marinas (ABM) president says the industry is "eagerly" waiting to see if the VAT on yacht charters is adjusted in today's Budget as he blamed its imposition for a 20 percent gross revenue fall at his business.

Peter Maury, who operates Bay Street Marina, told Tribune Business that the Bahamas had "shot ourselves in the foot" with the Government's decision in last year's Budget to impose the 10 percent levy on yacht charter fees and, in so doing, more than triple the tax rate on this niche.

Speaking as well-placed sources, speaking on condition of anonymity, suggested the Davis administration may adjust or completely eliminate the yacht charter fee in today's 2023-2024 Budget, he warned that even if such reforms were unveiled it would take some time to woo yacht charters back as many vessels had already settled their itineraries for 2024.

Mr Maury told this newspaper that the loss of yacht charter business, as boat owners diverted their vessels to lower tax jurisdictions, had been especially hard for the Family Island communities that were typically boosted by spending from guests and crew.

"Everybody is in agreement. Based on our performance, it definitely hurt occupancy," Mr Maury said of VAT's imposition. "I ran through the Exumas at the weekend and a lot of the marinas were not full like they were last year. In some of the Out Island marinas, they're seeing it a lot worse than we are, which is bad thing.

"The Out Island marinas are not like Nassau. They depend on visitors coming in there. The yachts coming in buy a lot of fuel, groceries, visit the amenities, visit the restaurants and it starts to add up and make a big difference in these small communities. This is a great industry to go to the Out Islands and costs the country nothing."

Unlike hotel guests, who often become "captured" where they stay, Mr Maury said spending by yacht charter guests and crews was felt more directly - and quickly - by "the street economy" in the Family Islands. The industry's clientele also tend to be higher earners and spenders than other tourist markets, and it played a major role in reviving the tourism economy post-COVID by spreading the wealth impact around the country.

However, in a move opposed by the ABM and many marinas, but praised by Bahamian tour boat and excursion operators as well as environmentalists, the Government imposed VAT on yacht charter fees in the 2022-2023 Budget on the basis that foreign vessels were under-taxed and should be contributing more for use of this country's natural resources, waters and their upkeep.

The Government also noted there were problems collecting existing taxes from the sector but, when added to the pre-existing 4 percent levy paid to the Port Department on the same charter fee, VAT more than tripled the tax rate to 14 percent while also exposing The Bahamas to suggestions that the country was 'double taxing' the industry.

Asked how much VAT's imposition, and the subsequent loss of yacht charter business, had cost his Bay Street Marina operation, Mr Maury replied: "Easily 20 percent of our gross revenue. That's what we submit our VAT and Business Licence fee on - our gross revenue. Add that up by 60 marinas. There are marinas much larger than what I am and have larger costs."

Pointing out that vessel owners could choose to base their boats "all over the world", and select territories where they can maximise their profits, he added: "It depends a lot on what the charter market is saying. It's like anything with pure economics. If it costs you $20,000 in taxes to go charter in The Bahamas, and costs you $20,000 less to charter in the Caribbean, they go to the Caribbean. If the owner can save a lot of money by going to the Caribbean, that's where the boat goes.

"Last year we had people in government say who will go to the Caribbean? It's too far, too costly. But if it takes only one day to get down there, they spend three months there and it takes a day to get back, what's the difference? I don't think there was a lot of consideration of the effect on local businesses and Family island communities.

"I'm hopeful that they will see errors that were made and can fix it. In the meantime, until they get rid of VAT, it's very complex for boats to get TIN numbers (Taxpayer Identification Numbers) and file." Mr Maury said that, even if the VAT was adjusted or eliminated, it will take time to attract the yacht charter business lost back to The Bahamas.

"Caribbean charter season is coming to an end, and people have booked for next year, 2024, already," he revealed. "Then the brokers all have to feel comfortable with saying: 'Come back to The Bahamas'. They have to feel comfortable enough about the situation to go back to clients and say The Bahamas has dropped their tax.

"There are so many moving parts to it. It was so easy the way it was. We had gained so much momentum. Now we have to go to these shows again and say: 'Come back to The Bahamas'. The brokers then have to call their clients. This is how it works. It's not done on a whim. The Mediterranean crossings, the Atlantic crossings, this stuff is booked a year in advance."

Mr Maury said the yacht charter industry was typically viewed as having a wealthy customer base who can afford to pay increased taxes, but outsiders did not understand how negatively boat owners react if they feel they are being over-taxed.

Noting the variety of businesses, such as provisioners and cleaners, who depend on vessels being in The Bahamas, he added: "Now, with no boats here, everybody is cannibalising each other. And we cannot tax them if they are not here. This is what I don't get. We were doing fine. All that private money was coming in and was free to The Bahamas.

"It didn't cost us anything. They flew in on their jets, came in on boats. Wherever they went money flowed through the economy, and every business was paying 10 percent back to the Government? What did we do? We shot ourselves in the foot. All the businesses are suffering and the Public Treasury is not seeing the benefit of additional revenue. It's crazy. It's not good for the business."