By NEIL HARTNELL
Tribune Business Editor
Leading Bahamian airline executives say the sector will “without a doubt” appeal the Government’s decision to levy 15 per cent Value-Added Tax (VAT) on domestic air transportation, describing the move as “unreasonable”.
Anthony Hamilton, the Bahamas Association of Air Transport Operators’ president, told Tribune Business that government representatives had informed the sector it would not be subjected to VAT at their initial meeting on the tax.
Describing the seeming policy shift as “disappointing”, Mr Hamilton told this newspaper in a recent interview: “This definitely has an impact, and that’s not a positive one. It’s a major concern.
“If we are going to be in the business, and continue to make a contribution on the national front, they have to take into account the investments we have made.”
What is likely to particularly rile Bahamian-owned airlines that serve Family Island routes is the Government’s decision to levy 15 per cent VAT on their passengers, yet ‘exempt’ both domestic land and sea transportation from the tax.
John Rolle, the Ministry of Finance’s financial secretary, indicated in a recent interview with Tribune Business that most businesses in the ground transportation sector - taxis and jitneys - were likely to fall under the mandatory registration threshold of under $100,000 annual turnover.
And he suggested that the ‘exemption’ for sea transportation was intended to assist the hard-pressed mail boat operators, preserving their routes to the Family Islands.
Yet this exemption also appears to assist the likes of Bahamas Ferries, a direct competitor to Bahamian-owned airlines.
Both Mr Hamilton and Captain Randy Butler, president and chief executive of Sky Bahamas, said the VAT issue was just another obstacle for the aviation industry to overcome.
It followed the latest rounds of Civil Aviation Department (CAD) and Nassau Airport Development Company (NAD) fee increases; the 2013-2014 Budget tax increases; and the increase in rental rates through the move to the new domestic terminal at Lynden Pindling International Airport.
Suggesting that the sector’s VAT tax treatment showed there was still “no idea, no plan” for the aviation industry, and the role it had to play in Family Island development, Captain Butler questioned whether it was designed to put local companies out of business.
“We believe it’s an unreasonable position,” Captain Butler told Tribune Business of how aviation was being treated under VAT. “This is definitely not the way to go.”
He added that he “cannot believe anyone at the table in the Cabinet” had thought through the wider economic consequences of levying 15 per cent VAT on Bahamian-owned airlines.
Suggesting that Bahamasair and foreign airlines serving the Bahamas would be protected by the Government subsidies they receive, Captain Butler said private carriers collectively employed more people, and served more Family Islands, than the national flag carrier.
“I am baffled,” Captain Butler said. “You’re going to see no new airlines coming out, you’re not going to see hiring in this industry, and you may see some people have to exit the market and let people go, closing or reducing operations to survive.”
The Sky Bahamas chief said that levying 15 per cent VAT on airline passenger ticket prices would result in a 20-25 per cent rise in domestic airfares, making it more expensive to fly to Cat Island than to New York and back.
“That’s not going to help us any,” he added, noting that Bahamasair did not have sufficient aircraft to service the Family Island routes covered by private carriers.