The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian marinas face “a fight to get back market share” that will take years as a study revealed more than-tripling tax rates cost this nation $90m through a 40 percent slump in foreign yacht charters.

A just-released industry position paper, ‘Yachting in The Bahamas’, written by Marcel Amann, the founder of Yacht Services Bahamas, reiterated that recent tax hikes and regulatory interventions “have dampened activity” in a sector estimated to generate half a billion dollars annually for this country’s economy.

Citing recent data from Yachting Magazine, he singled out the imposition of 10 percent VAT on foreign yacht charter fees as especially harmful for The Bahamas’ competitiveness given that it tripled the overall tax rate to 14 percent when added to the already-existing 4 percent Port Department levy.

Asserting that this taxation burden was much higher than Caribbean rivals, although no comparative figures were provided, the report said the ease and convenience of conducting business in The Bahamas has also been made more costly, time-consuming and bureaucratic for visiting boaters through the introduction of requirements such as obtaining a VAT taxpayer identification (TIN) number.

“The yachting sector contributes about $500m annually to The Bahamas’ economy, though recent tax measures have dampened activity,” the industry position paper said. “The evolving regulatory landscape in The Bahamas has introduced both opportunities and challenges for the yachting industry.

“The implementation of a 10 percent VAT on yacht charters in 2022, and a 4 percent Port fee that was already previously implemented, aimed to boost government revenue but has led to concerns over its high 14 percent combined tax rate, especially compared to competitors like the Cayman Islands and US Virgin Islands.

“This policy shift contributed to a 40 percent decline in yacht charters, resulting in a reported $90m revenue loss and affecting related sectors like provisioning and hospitality. Additionally, administrative requirements, such as obtaining a Taxpayer Identification Number (TIN) for VAT compliance, have complicated operations, pushing some yachts to consider alternative destinations like Puerto Rico or the Dominican Republic.”

The report, drawing on submissions from the ABM, added that “over a few hundred yachts and boats left” The Bahamas’ Port Department and flag registry in 2023 due to what were described as “regulatory challenges”. It said: “To regain competitiveness, revisiting tax policies, streamlining compliance and ensuring reinvestment in the sector are essential steps.”

Peter Maury, the Association of Bahamas Marinas (ABM) president, whose  organisation supported and contributed to Mr Amann’s report, told Tribune Business yesterday the industry was “eager” for the study’s release in the hope it might help persuade the Government to alter policy towards the sector ahead of the upcoming Fort Lauderdale Boat Show at month’s end.

Reiterating the study’s call for greater collaboration between the Government and industry stakeholders, he emphasised that the ABM is not calling for taxes and fees to be eliminated but, rather, set at a level visiting boats, yachts and charters “can live with” such as the 4 percent Port Department levy.

With a replacement online portal for visiting boaters to clear into The Bahamas, and pay the necessary taxes and fees, yet to emerge, Mr Maury said this - together with new regulatory processes and interventions such as the Immigration Department’s $200 per person processing fee to extend visitor stays - is making it harder for vessels, crews and passengers to conduct business in this nation.

And, with the advantage of being one of the first jurisdictions to open to visiting boaters post-COVID now eliminated, the ABM chief said “our competition has got stiffer and we are not the only place to go” while warning The Bahamas must now battle to regain the foreign charter and other business it has lost.

“The biggest takeaway is let’s get the whole process streamlined with one portal like we had before, and maybe more people will start coming back,” Mr Maury told this newspaper of the study’s main message. “These other jurisdictions have opened up and that’s not helping us either.

“We’re going to have to fight to get our market share back, and with the difficulties we’ve made, forget it. It would take us years for us to get it back. We now have many more slips to fill. After COVID had gone, The Bahamas opened up and we were successful in getting a big market share of what existed at the time because we were ahead of everyone else.

“Now, that’s gone away. Cruise ships, resorts, all sorts of things are around now. Our competition has got stiffer, and other jurisdictions have opened up and built marinas. For businesses to make money and the Government get taxes out of this, we have got to get competitive with the rest of the world. We are not the only place to go. We are not the only destination any more. It’s got way more competitive.”

Mr Maury said the western coast of South America was emerging as a major boating competitor due to the ability of large vessels to transport high-end yachts to this region via the Panama Canal. “Our biggest competitor is not the Caribbean any more,” he added. “Now, with the larger vessels, they are shipping yachts right through the Panama Canal and dropping them off in the Pacific at a higher rate than I’ve seen.

“We need to be mindful of that. It just seems that nobody in our government understands what is going on in the industry but they make policy. We definitely need greater government and private sector collaboration because we are making simple processes way too confusing.

“We’re trying to get the word out. We need some help so they [the Government] can bring some good news to the Boat Show. They can sure fix this quickly. We’re eager for some kind of change before the Boat Show on the 28th.”

The Davis administration, though, has sought to justify the boating-related fee increases by accusing many foreign yacht charters of evading and avoiding the 4 percent Port Department fee that had been in place for years. As a result, these vessels - and their owners and operators - were enjoying a ‘free ride’ by using The Bahamas maritime environment, in particular, for their business will contributing nothing to its upkeep.

Michael Halkitis, minister of economic affairs, argued in the wake of VAT’s introduction in the 2022-2023 Budget that the foreign yacht charter industry had for years “enjoyed a windfall at The Bahamas’ expense” by using this country’s marine environment and natural resources to earn millions of dollars without paying its fair share to the Public Treasury.

And Dexter Fernander, the Department of Inland Revenue’s operations chief, told Tribune Business recently he is “baffled” at assertions that yacht and boat charters are facing significant delays in obtaining TINs because there is a “fast track process” for their issuance given that this represents “easy money” for the Government.

A key feature of the administration’s tax policy, in its search for greater revenues for the cash-strapped Public Treasury, has been to raise fees on foreigners - primarily tourists - while being careful to avoid increases that would turn off the voting Bahamian public.

This has led to the increase in cruise passenger departure taxes, as well as the imposition of tourism and ‘environmental’ levies, as well as the hikes levied on both the boating/yachting and private aviation industries. The last two, in particular, appear to have been singled out because their customers are perceived as wealthy and therefore able to easily absorb and afford the increases.

There are also solid arguments for some of the increases. Certain fees have not been raised for years, thus failing to keep pace with inflation, while the environmental impact from the cruise industry needs to be offset. Bahamian tour and excursion operators have hailed the VAT on foreign yacht charters as helping to create a more level playing field for them by evening out the taxation burden.

Mr Maury, though, said yesterday that the Government needs to look at the wider picture. He argued that the fee increases have coincided with more cumbersome and bureaucratic processes, with visiting boats now needing to often physically visit agencies such as the Port Department and Immigration to obtain all the approvals they require and pay the associated fees.

This has also combined with the post-COVID cost of living crisis, which has made food, electricity and other supplies that visiting boats obtain in The Bahamas far more expensive. “We’re not growing the business for Bahamian companies,” the ABM president added. “There’s no communication with the industry, stakeholders. Everybody throws in what they think is best.

“We’re seeing it in aviation, seeing it in other industries, where people say it’s not getting easier to do business in The Bahamas and cost is a big part of it. ...A lot of us know these captains personally and individually, and they’re telling us we love coming to The Bahamas but it’s become [cost] prohibitive.

“Over-bureaucratising it is not going to get the business back. I’m not saying to go to zero [on taxes] but let’s make it something they can live with. The Port’s 4 percent, nobody couldn’t live with that.” Mr Maury again lamented that the promised replacement for the marina industry’s SeaZPass portal, which was ordered closed by the Ministry of Finance, has yet to materialise two-three years later.

That portal enabled incoming boats to clear into The Bahamas online and pay their 4 percent Port Department charter fee. Mr Maury said it collected $4.5m in revenue but, despite the 2024-2025 Budget allocating financing for DigieSoft Technologies to develop the $3.355m replacement, this has yet to occur.

The ‘Yachting in The Bahamas’ paper added: “Demand is increasingly shifting towards multi-destination trips across the Caribbean, as yacht owners seek longer stays, privacy and unique cultural experiences. To remain competitive, countries like The Bahamas must improve marina services, streamline regulations and collaborate regionally to retain their status as a premier yachting destination....

“The yachting industry is a key contributor to The Bahamas’ economy, driving tourism, job creation and tax revenue. While the sector faces challenges, including increased taxes and regulatory hurdles, there remains significant potential for growth. Strategic investments in infrastructure and reforms to simplify the regulatory environment will help The Bahamas maintain its competitive edge as a top yachting destination in the Caribbean.

“Collaboration between government and industry players is vital to ensure tax policies remain attractive to yacht owners and charters. By focusing on sustainable growth, supporting local businesses, and enhancing infrastructure, The Bahamas can harness the full potential of its yachting industry, ensuring long-term economic benefits and stability.”