By NEIL HARTNELL
Tribune Business Editor
A Bahamian aircraft registry must have clarity on its tax and incentive structure to succeed, an aviation law specialist warning that current uncertainties had forced him to “turn away a lot of work”.
Llewellyn Boyer Cartwright, a Callenders & Co attorney and partner, told Tribune Business that the Bahamas must give “much consideration” to how it would develop a competitive advantage over rival international financial centres (IFCs).
Still, speaking after the Government last week confirmed it had received the final consultants’ report on creating an expanded Bahamian aircraft registry, Mr Boyer-Cartwright urged: “While it has momentum, let’s ride the wave.”
Calling on the Christie administration to make its establishment a “high priority”, the attorney said an aircraft registry would provide “added value” for the Bahamas’ financial services client base, and provide numerous “spin offs” for other industries.
Glenys Hanna Martin, minister of transport and aviation, last week told the House of Assembly that the Government had received the final report from consultants, ICF, on the path to establishing a new registry and associated aircraft mortgage registry.
Mrs Hanna Martin said ICF had recommended that the Bahamas enter the aircraft mortgage registry business, and laid out a 28-month timetable for its implementation./
She added, though, that its creation would require numerous legal and policy initiatives that Mr Boyer-Cartwright and others in the aviation industry have previously acknowledged as essential.
Mrs Hanna-Martin said the Bahamas would have to either ratify the Cape Town Convention, which would allow it to recognise liens and charges - such as mortgage loans - held on aircraft , or pass its own legislation that has similar effect.
She acknowledged that fees would have to increase, as those for the existing registry were insufficient to cover its operating costs, while the Bahamas would have to “waive or eliminate” the 10 per cent Customs duty levied on imported aircraft.
Reacting to Mrs Hanna Martin’s 2016-2017 Budget debate contribution, Mr Boyer-Cartwright said her announcement represented “positive progress”.
“It’s a positive step in the right direction,” he told Tribune Business. “If I had my way, I’d like to give it - I’m not going to be so bold as to say top priority - but I’d give it high priority, as it ties into the financial services sector, the aircraft maintenance sector and the civil aviation sector.
“I would say it would be well worth the Government deciding to pay close attention to it, and make it happen. Sooner rather than later would be a good thing.
“I hope we just don’t sit on it and let it go by the wayside. While it has momentum, let’s ride the wave.”
While the Bahamas already possesses an aircraft registry, it barely registers as a blip on the radar screens of the international aviation industry and potential clients when compared to the likes of Bermuda and the Isle of Man.
This nation also has no aircraft mortgage registry, which would enable lenders to register and protect their interests over planes and aircraft registered in the Bahamas.
Such a facility is an essential complement to an aircraft registry, and vital to the latter’s ability to attract business, as it will prevent plane owners from selling the asset in defiance of a lien/charge attached to it.
Mr Boyer-Cartwright suggested that the Bahamas initially seek to carve out a specialist niche for itself by focusing on the corporate/private jet market, a segment that linked well with its high net worth client and resident base.
“There are those private jets looking for a jurisdiction where they can put their aircraft because they have something of value to offer them,” he added.
The Callenders & Co attorney and partner, though, agreed that it was vital that the 10 per cent Customs duty on imported aircraft be eliminated if the Bahamas was to grow beyond its existing registry.
And, with 7.5 per cent Value-Added Tax (VAT) another consideration, Mr Boyer-Cartwright said it was vital that the Bahamas offer a clear, predictible tax and incentive regime to aircraft owners and operators.
“Now that we have VAT, we have to look at other jurisdictions like Malta and the Isle of Man, which have VAT concessions,” he told Tribune Business.
“It’s not that we have to eliminate VAT, but say we have our concessions. It could be that if the aircraft operates outside the VAT zone for a certain period of time, it could be exempt or attract a lower rate.”
Mr Boyer-Cartwright added that tax and incentive policies needed to be codified in law, and not merely left to administrative whim as to whether they were enforced.
“I do know of an aircraft owner, a local company, who is thinking of purchasing an aircraft, but don’t want to register here because of that 10 per cent duty that’s in place,” he said.
“Whether it’s customarily imposed or not, I can’t give my client ad-hoc advice to say they’re not going to do that. I’ve turned away quite a lot of work because of that.
“Now, with VAT in place, you’re talking 7.5 per cent plus 10 per cent [import duty]. What’s going to be imposed in order for us to be competitive? We’d have to give that close, and plenty of, consideration.”
An expanded, competitive aircraft registry is viewed as a significant ‘value-added’ product for the Bahamas’ high net worth residents and financial services clients, many of whom either own - or have access to - their own private jets.
It would also complement the Bahamas Maritime Authority’s (BMA) efforts to create a high-end yacht registry, and the tourism sector’s drive to attract wealthy visitors. For these reasons, Mrs Hanna Martin suggested all three industries forge a partnership with the aircraft registry proposal.
Apart from strengthening and diversifying the Bahamas’ product offering, and making the jurisdiction more attractive, an aircraft registry and associated mortgage facility would also boost civil and commercial aviation.
The increased number of Bahamas-registered aircraft, for example, would likely drive an increase in maintenance demand, and tax and structuring advisory work.
“Speaking to the major players over the years, I’ve not had anybody tell me this is not a good thing for their jurisdiction,” Mr Boyer-Cartwright told Tribune Business.
“When you’re looking at registering an aircraft in the Bahamas, you will look to the financial sector to set up a holding company to own the plane. You will pay landing fees and parking fees, and hire consultants, and on you go. It’s a real spin-off.”
Praising Mrs Hanna Martin’s House statement as “progress”, Mr Boyer-Cartwright added: “Hat’s off to the Minister and the Ministry, and all those that have been involved.
“It has come a long way in the last few years. I think everything she touched upon is what I’ve been saying since the outset. It will touch many aspects of the financial services industry, and many aspects of civil aviation and the maritime sector.”
Mrs Hanna Martin, though, said last week: “The Government must now make a decision on when and how we will proceed to implementation.”
Mr Boyer-Cartwright said the ‘when and how’ were the “two key questions” that the Government needed to answer, along with when it would place a budget and organisation behind the aircraft registry initiative.
He pointed out that rival IFCs, such as Bermuda, Malta, the Isle of Man and the Cayman Islands, were all ahead of the Bahamas and promoting their aviation registries and maritime sectors together.
“I know a number of smaller operators will be concerned about an increase in fees,” Mr Boyer-Cartwright told Tribune Business, “but we’re not talking about the commercial segments of the market yet.
“We can do what other jurisdictions did: Start out looking at the corporate/private jet sector. Start with that, and if the fees cover the cost of running the registry, we’ll be ahead of the game. It will be the will of the Government to see it move forward.”