The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Value-Added Tax (VAT)-related confusion could undermine the Bahamas’ efforts to grow its multi-million dollar private aviation business, the Tax Coalition’s chairman has warned.

Gowon Bowe urged the Ministry of Finance’s VAT Unit to answer private sector queries quickly, to prevent these situations “spiralling into confusion or pandemonium”.

He was speaking after Family Island fixed base operators informed Tribune Business that the VAT Unit had issued conflicting opinions on whether they should levy the 7.5 per cent tax on fuel and other supplies sold to private planes flying into the Bahamas from overseas.

The “dilemma” facing Family Island FBOs was outlined in an e-mail sent to Tribune Business at the weekend by Al Wehrenberg, the operator at Long Island’s Stella Maris International Airport.

He told this newspaper: “We, along with all other FBOs at all the Bahamas airports, are now facing another dilemma regarding VAT.

“There have not been any industry guidelines distributed to the FBOs for administration of VAT. The actual law is vague as to the application of VAT at the country’s airports.”

Mr Wehrenberg then added: “To further complicate the matter, the VAT Hotline and guidance received from them in writing is contradictory. We, at Stella Maris, were advised that ‘commercial international aircraft transporting paying passengers and/or cargo internationally to and from the Bahamas to a destination outside the Bahamas’ are VAT zero-rated.

“As such, we have not been charging such traffic VAT on fuel and services as long as the pilot provides a copy of their Customs receipt, documenting they paid their $75 in-bound and/or $75 out-bound processing fees.

“We still continue to charge VAT on fuel and services on domestic aircraft and foreign, private-owned aircraft, as stated in writing by VAT personnel.”

Highlighting the experience of many in the private sector, and not just in the aviation industry, Mr Wehrenberg said the VAT instructions received by Stella Maris were contradicted by those sent to another FBO operator.

He wrote: “Another FBO on North Eleuthera was advised in writing from personnel at the VAT Hotline that ‘fuel for aircrafts (whether commercial Or private) arriving and departing international at any airport will be subject to VAT at the rate of zero’.

“Two different interpretation regarding the collection of VAT on fuel and services on foreign, private owned aircraft. So, which one do we follow?

“We have made many calls to speak to someone at the VAT Hotline for clarification. However, we cannot get through to anyone. Most times the line is busy or unanswered. Even after being able to leave a voice mail we do not receive a call back,” Mr Wehrenberg added.

“There have been many news articles on how everything is going so well with VAT, maybe in Nassau, but the Family Islands are not in the same position. We need HELP!”

John Rolle, the VAT Comptroller and financial secretary in the Ministry of Finance, did not respond to Tribune Business phone calls and e-mails seeking comment yesterday.

However, the VAT Act and regulations state that international flights - both coming into and exiting the Bahamas - are to be treated as ‘zero rated’ because they are effectively ‘exports’ that boost the tourism industry.

Such VAT treatment means that while the end-consumer is not charged the 7.5 per cent levy, the provider can also reclaim the tax paid on their inputs.

Mr Bowe, when informed of the situation by Tribune Business, warned that the VAT Unit’s failure to promptly address the FBOs’ queries would cause confusion and uncertainty, undermining plans to grow the Bahamas’ share of the lucrative private aviation market.

Elite Traveler Magazine recently ranked Nassau as the top private aviation destination in the Caribbean for the peak 2013 winter season, with Abaco and north Eleuthera joining it in the regional top 10.

Between the three, the private aviation industry and its clients were estimated to have generated almost $388 million in economic benefits, with Nassau producing $278 million, Abaco some $64 million and north Eleuthera just over $45 million.

And Executive Flight Support, based at the Lynden Pindling International Airport (LPIA), last week unveiled a management agreement with Jet Aviation and related hanger/facilities expansions.

Mr Bowe told Tribune Business: “We’ve seen a lot of activity to promote private aviation growth. We don’t want to lose that with confusion over fuel.”

He agreed that the VAT guidance notes had failed to address the issue raised by Mr Wehrenberg, and said the VAT Unit needed to address such questions “effectively and efficiently” or “ramp up” to deal with such situations.

“They really must take notice that this does not spiral into confusion or pandemonium if this is not answered quickly,” Mr Bowe told Tribune Business.

“That’s critical for them. We always have to remember that our tax policy has to be in line with economic policy. We’re trying to assist the private aviation industry, and can’t have confusion on who pays fuel and who doesn’t.”