By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Government is aiming to roll-out a vacation rental register that could ultimately feature 10,000 properties in time for the May Budget, the deputy prime minister said yesterday, as he voiced concern over “law breaking” by some owners.
Chester Cooper, also minister of tourism, investments and aviation, told reporters before the weekly Cabinet meeting that the Davis administration will “look into” the renting of boats and vehicles to guests by vacation home renters who lack the necessary licences and permits to do so.
Suggesting that such practices were especially prevalent in the Family Islands, the deputy prime minister added that the Government was planning to amend the law so that VAT is levied on the full value of the rental rather than just the commission paid to sites such as Airbnb and VRBO.
Mr Cooper, estimating that there are between 7,000 to 10,000 vacation rental properties in The Bahamas, said the Davis administration will “seek to regulate first” and register those listed on Airbnb because they were smaller in number and easier to do. Pointing out that VRBO had an especially strong Bahamas presence, he added that the registration would then move on to all other platforms and those advertised “over-the-counter” via the Internet and What’s App.
Affirming that the law and taxation will apply to all, the deputy prime minister said it was hypocritical of foreign property and vacation rental owners to both complain about taxes and the quality of infrastructure when failing to pay the former meant there was no financing to upgrade the latter.
Reiterating much of what he said at last year’s Exuma Business Outlook conference, Mr Cooper said: “I foreshadowed that the Government would look to tax in a meaningful way vacation rentals. There is already a Memorandum of Understanding (MoU) with Airbnb, and at the moment we are collecting VAT on the fee that vacation homes would pay. We are seeking to make an amendment so that the VAT applies to the entire amount of vacation rentals.”
However, the situation described by Mr Cooper was supposed to have been addressed by the Minnis administration in the original 2021-2022 Budget passed by the previous Parliament in June. It sought to extract an extra $31m annually from the vacation rental market by “levelling the playing field” as it related to taxation.
The VAT Act was changed to make clear to Airbnb and its competitors that taxes must be levied “on the full value of the rental”, rather than just the commission paid to their platforms. “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,” ex-prime minister, Dr Hubert Minnis, said then.
Meanwhile, Mr Cooper yesterday charged: “We are also concerned about the breaking of the law by many persons who do vacation rentals, particularly in some of the islands like Exuma and Abaco and elsewhere, where they offer rental cars, they offer rental boats without the relevant licences, so we’re looking into that.
“We’re going to seek to register, as hotels are required to register, all of the vacation rental houses throughout the country. That’s a process currently being undertaken by the Hotel Licensing Department under the policy oversight of parliamentary secretary John Pinder from my ministry.
“That is something that has been several months in the making, and we’re almost at the stage where we’re able to roll this out, hopefully in time for the Budget debate.” Mr Cooper estimated that there are around 7,000 to 10,000 vacation rental properties in The Bahamas, and he pledged: “Ultimately the law will apply to all.”
The deputy prime minister also said 10 percent VAT would be levied on every rental regardless of whether the property owner meets the VAT registration threshold of $100,000 in annual revenues or not. He added that Airbnb was currently levying, and collecting on the Government’s behalf, VAT even if the property owner is not a VAT registrant.
And Mr Cooper also asserted that there was unlikely to be “a significant impact on demand” from vacation rental clients now having to pay an increased rate via 10 percent VAT. Instead, he described it as a “win-win”, as more formal regulation and oversight will enable Bahamians to receive government assistance to participate in the industry, thereby increasing local ownership, while the Government benefits from tax revenues generated.
“I take a view that we must do both,” Mr Cooper said, when asked whether vacation rentals would be negatively impacted by higher taxation and regulation. He added that the Government would seek to assist Bahamian vacation rental owners via the likes of the Small Business Development Centre (SBDC), Bahamas Entrepreneurial Venture Fund and Tourism Development Corporation.
“But in the meantime we must render to Caesar what is due to Caesar,” the deputy prime minister said, “and many of these vacation rentals, the money is paid into an account abroad. They come in, bring their food and there is very little economic impact left for the community where vacation rentals exist.
“It has to be an equitable distribution, and we’re simply asking for 10 percent, which is the VAT paid by the vacation renter. The impact, if there’s an increase in the cost of the vacation rental, we don’t think that will significantly impact demand and, therefore, this is going to be a win-win. A win-win for the individual doing the renting, because of the support provided by the government agencies, and a win for us because of the taxes collected.
“Let me say to you that I have had experience with foreigners who own homes in the Family Islands, and who complain about things like property taxes and complain about VAT, but also complain about the state of the infrastructure,” Mr Cooper added.
“They complain about the roads, they complain about the water, they complain about the electricity, they complain about the state of the airport, and my response is: How do you expect us to fix these things if you don’t want to pay taxes? It has to be equitable, and this is what we’re going to ensure will be done.”
Mr Cooper said vacation rentals enable The Bahamas to increase its room inventory without relying on the construction of new resorts, while providing visitors with authentic community-based experiences that a growing segment of the travel market craves.
Comments
Sickened 2 years, 1 month ago
"They come in, bring their food and there is very little economic impact left for the community where vacation rentals exist."
This is just a lie. I have never heard of tourists flying in with their food for a family of 4 for a whole week. Ridiculous statement for what might be a tiny fragment of the VRBO rental market. Also, these renters are more likely to rent a car and visit attractions than any hotel guest would. And where almost all of the money spent by VRBO guest go to private individuals and family business this is a far cry from hotel guest revenue where almost every penny goes into the pockets of one large offshore corporation.
ohdrap4 2 years, 1 month ago
Actually , I have known people who brought food with them coming to the family Islands.
Also some bahamians do bring their cooler when they rent in the family islands. I myself have done so, instead of paying $15 for grits and tuna.
Are traveller's now compeled to buy food whereever they go? Gee, i have always carried cookies and chocolates when I travel abroad. Only thing i can no longer take is liquids.
Sickened 2 years, 1 month ago
I take your point and I agree that some Bahamians do it when going to the out islands. I try to take only things that I 'probably' won't find - like good scotch. Other than that my family always goes to the local supermarket. Additionally, we tend not to cook when we have island getaways as we consider them vacations. If we can't afford a vacation we simply don't go on vacation.
becks 2 years, 1 month ago
It is not a lie. Plenty of vacationers bring in lots of food from home with them, even if they are only staying for a week. They bring steaks, hamburger meat, pork, deer etc. Plus ordinary stuff, like peanut butter,oatmeal,coffee, brownie or cake mix, powdered potatoes etc. Its bizarre.
TalRussell 2 years, 1 month ago
Far too many of the working poor people are government low wage workers and those employed in the tourism sector. Sometin' must brung about a change to the mythology of continually creating even more working poor people. Society's resources must work to **uplift the poor...Pindling was the first, and last, to uplift thousands upon thousands of the poor, blacks, colored's and Conchy Joe's; ― Yes?
Club4021 2 years, 1 month ago
I am a vacation home owner and think this will be able to register my property and collect and pay VAT. I have been trying to do this for years. The process for this needs to be simple. I have spent lots of time on numerous phone calls that never get answered or go to a dead-end number, emails that are not returned, confusing requirements and processes that I'm told in the 1-in-50 chance that someone at Inland Revenue picks up the phone - like that I have to sign up for NIB. Make this process simple and straight forward to get set up, report rents received, and pay the VAT that is collected. And then when that is rolling, the Government needs to be transparent about the money collected on each island and what it is used for - The infrastructure better improve, the roads, the water, the electricity, the bridges. The $30 million in VAT is a fraction to what will get collected if it is made easy.
temptedbythefruitofanother 2 years, 1 month ago
Considering the stone age "infrastructure" on most of the out islands, it's pretty laughable that this guy criticises legitimate home owners for complaining. Pay more tax for what?
Diesel powered "temporary" generators, tank trap sized potholes, an electrical grid that crashes every 5 minutes, coax cable that's rusted and doesn't work, invisible police force, laughably bad "water" system,....and on and on and on and,....
Sickened 2 years, 1 month ago
Any funds raised will just slip out the back door. I can't justify giving government anymore money than they already get. Government first needs to plug the holes in their consolidated fund bucket and then get rid of the +10 thousand staff that don't even show up for work let alone put in a full days' labour. Then, and only then, could I think about giving government any more money.
Junkan00 2 years, 1 month ago
The Bahamas is, and will remain totally reliant on tourism for many generations to come
As a positive, we have some of the most beautiful waters in the world, stunning beaches, friendly people, and a mystical image among people from all around the globe. American's and Canadian's can access the country relatively easily, and European's accept the high travel costs to get here, as they want to experience 'paradise' for themselves.
On a less positive note, our country is extremely expensive and really doesn't offer good value for money, especially when you look at other options available within the Caribbean. New Providence is what it is, run down, dirty, and crime ridden. The principal family island are magical, but suffering from years of neglect in maintaining and developing suitable infrastructure to support a growing tourism sector.
There will be always be visitors who seek out the all inclusive hotel, or cruise ship vacations (and that is what has and will drive New Providence), but there has been for nearly a decade a growing group of independent travellers who want to unique experiences that they have full control over, and that is what has created the private home rental market globally.
I can only speak as a member of the community that our DPM represents, that it is transforming our island, and creating massive opportunities for the people of Exuma. Even though our new airport came to a halt over a month ago, as the government hasn't paid the contractor a cent since they started last July, our new stretch of road has not been completed, and should have been finished last year, the people still come, and they want to stay in private homes, and be guide by ;local people to help them have the vacation of a lifetime.
There are two clear sectors in the private rental market, luxury and affordable. I am not against the luxury market who take over $ 100k per year, having to pay VAT, and being able to offset their accumulated VAT costs from running what is a business, and most of those guests will probably be able to deal with the additional 10% VAT charge to their vacation. However to charge VAT on people below the VAT threshold, goes against the very laws of our VAT system, and hurts Bahamians and legal residents of the Bahamas, who are on a limited budget.
All of the monies I earn through renting an apartment stay on island. My guests rent cars, boats, take excursions to see the swimming Pigs, buy food in the stores, go to local bars and restaurants, and spend thousands of dollars per person when they visit. Everywhere else the go they pay 10% VAT on all their purchases. isn't that enough of a contribution?
if I was to increase my prices by 10%, I would lose a large percentage of future guests, who would just decide that the Bahamas isn't value for money. If I don't earn money, I can't spend it on the island, and if my guests don't come, neither can they!
DWW 1 year, 7 months ago
Anyone ever heard about how long it takes to National Economic Council approval for an non-Bahamian entity? i have to laugh at how incompetent the bahamas govt is or I will cry. You want foreign homeowners to collect tax but you don't create a mechanism to do so. It is just plain asinine pandering to the select few lucky hotel owners. DO HOTELS PAY PROPERTY TAX? no? oh! well maybe every home owner who rents to vacationer should also get automatic exemption from property tax. PLP FNM both need to put up or shut up. Neither have any idea what is going on outside of the kindergarten playground call parliament.
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