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Vat Revisions Prevent Group Tourist 'Erosion'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian hotel industry has avoided “a significant erosion” of its group visitor base after the Government adopted the sector’s preferred VAT treatment of pre-bookings, Tribune Business was told yesterday.

Robert Sands, Baha Mar’s senior vice-president of government and external affairs, revealed to this newspaper that the Christie administration had now “positively addressed” more than half the hotel/tourism industry’s outstanding VAT concerns.

With ‘gross overseas sales’ and group pre-bookings now addressed to the industry’s satisfaction, Mr Sands said four of the industry’s seven remaining issues had been resolved. Among those left are concerns relating to VAT’s treatment of casinos.

The Government, in VAT transition ‘guidance notes’ issued at the weekend, confirmed it will exempt pre-booked group and business packages from VAT provided they were paid for - or a deposit put down - before January 1, 2015.

These guests will still be liable to pay the 10 per cent room tax, and any services not included in the package will be subject to 7.5 per cent VAT post-January 1.

Hotels have to provide a list of these bookings to the VAT Comptroller by October 1, and subsequently inform him of any cancellations or adjustments.

“Bookings concluded before or after January 1, 2015, will not be subject to VAT until the application of hotel guest tax has been repealed under the Hotels Act,” the Ministry of Finance said.

“Any contract executed after August 31, 2014, will be presumed to have made provision for VAT for accommodations commencing on or after January 1, 2015.”

In response, Mr Sands said the proposed VAT treatment of pre-booked group bookings - and the October 1 cut-off dates - matched the industry’s recommendations.

“It will mitigate against potential cancellations,” Mr Sands told Tribune Business of the pre-booking VAT treatment. “The potential of otn addressing this would have eroded a significant group base for a number of hotels.”

With concerns over price increases, and the possibility of ‘double taxation’, removed for pre-booked group and business clients, the Bahamian hotel industry can now turn its attention to other matters.

“We’re continuing to work on some issues related to the casinos and one or two other areas,” Mr Sands told Tribune Business. “The last time we spoke, there were seven issues. We believe we have positively addressed four of them, and continue to work and plug away on three.”

As previously revealed by Tribune Business, these key concerns revolved around how the legislation proposed to levy VAT on mandatory gratuities; overseas sales; Promotion Board levies; and overseas advertising and other expenses.

The BHTA was also opposed to levying VAT on a hotel’s own supplies, and is seeking further “limited” tariff reductions.

This newspaper understands that the Government may also have agreed to exempt mandatory gratuities from VAT, although this could not confirmed before press time.

In response to Tribune Business’s questions, Stuart Bowe, the BHTA’s president, said the Ministry of Finance had broadened its definition of VAT ‘exempt’ pre-booked groups to include those that had put down deposits - not just those who were fully paid-up.

“The initial proposal by Finance was that the arrangement would be applicable only for pre-booked contracts which are paid in full prior to VAT coming into effect,” he explained.

“In our recent discussions we’ve pointed out that this is not the practice for pre-booked groups, and that deposits and timed payments are made starting from the point of booking to completion of the group’s stay. The Ministry recognised this and has made the adjustments accordingly.”

Mr Bowe said the Bahamas needed to honour prices agreed in a contract, adding: “Groups are booked as far as several years in advance. Any significant variance from the contracted price raises the possibility that the group will cancel their agreement and move their business to a lower-priced destination. Both the industry and the Government stand to gain by making every effort to retain this business.”

The BHTA president also revealed that the Government was considering its request to leave in place the current 5 per cent room tax for Grand Bahama hotels that “are current with their financial obligations”.

“This was part of the Government’s efforts in 2012 to assist Grand Bahama hotels and the tourism industry, and was adopted for five years,” Mr Bowe said.

Give that hotels provided pre-booked group lists to the Government in two weeks in 2010, when the room tax was increased from 6 per cent to 10 per cent, Mr Bowe said the October 1 deadline was reasonable.

He added: “BHTA has been advising hotels and members to make all necessary adjustments to contracts and trade information to prepare for VAT and increased communications when it became clear recently that VAT would come into effect early next year. The Government is being fair and reasonable in their approach.”

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