By NEIL HARTNELL
Tribune Business Editor
A prominent vacation rental home owner yesterday warned that the Government’s plans to tax and regulate the sector threaten “to kill it”.
Bruce Raine, International Private Banking Systems’ (IPBS) principal, told Tribune Business that unless carefully handled the Minnis administration could undermine a growing, vibrant market that was attracting a new type of tourist to this nation and helping to develop Bahamian entrepreneurs.
An Airbnb ‘host’, Mr Raine revealed that the company was already levelling Value-Added Tax (VAT) on the Government’s behalf on ‘booking fees’, even though this activity was taking place via its website in the Republic of Ireland.
Dionisio D’Aguilar, minister of tourism, previously pledged that VAT would not be levied on the sector’s rental income due to difficulties in determining whether landlords had passed the $100,000 registration threshold.
He suggested that an alternative taxation method will have to be found, and Mr Raine yesterday expressed concern that its imposition would drive “price conscious” renters away from the Bahamas to other destinations.
“I’ve been in it since June last year; I’ve done a year or more,” he explained of his relationship with Airbnb. “In that business you interact with the guest several times over e-mail and that sort of thing before you say ‘yes, come over’ or ‘no, we can’t take you’.
“What comes across increasingly is that these people, not that they are cheap, but they are price conscious. There is a limit beyond which they cannot go. By taxing it, they’re going to kill it. It’s a global thing, and there are so many places people can go.”
Mr Raine said Airbnb’s database enabled it to advise him on the likely rental rates that will attract more buyers. Acknowledging that the vacation rental site had already promised to co-operate with the Government via their recently-signed Memorandum of Understanding (MoU), he added: “It’s going to be to everyone’s detriment in my view.
“It’s not that the people don’t contribute. They pay departure taxes, rent cars, go to the grocery store and walk all over the place. They’re not cheap; not like the cruise ship passengers. When people leave my home, there’s usually food still in the fridge and it’s organic. They buy high-end food.”
Mr Raine expressed concern that the Bahamas felt it could follow the likes of the US in imposing taxes on Airbnb and other vacation rentals, yet had failed to realise those nations do not have to contend with high electricity costs and inadequate public transportation.
“It’s no good saying tax it because it’s there,” he told Tribune Business. “It won’t be there.”
Mr Raine said perceptions that most vacation rental hosts were foreign second homeowners was not correct, as most of those he encountered when trying to find accommodation for visitors he was unable to take were Bahamians.
“The thing that irritates me so much is they talk about foreigners, but the Airbnb hosts in the Bahamas - and I run into many of them - those are Bahamians who are entrepreneurs,” he added.
“They are getting into a new business. They are doing a good job. Why penalise them? For the Government to say it’s foreigners, that’s hocus pocus. These Bahamians don’t ask anything from the Government. They take it on, do the work, and now you’re going to penalise them. You’re going to throw it all away. It’s awful. It’s really bad.”
The vacation rental market has increasingly been viewed as an opportunity to better diversify the Bahamian tourist market, and attract a different type of longer-stay visitor wishing to stay in non-hotel accommodation.
Seen as holding great promise for Family Island development, the sector also provides avenues to develop Bahamian entrepreneurship and diversify tourist spending directly into businesses and communities away from the main hotel/casino strips.
Mr Raine said his own calculations suggested that vacation renters spent $7-$10 million per year directly with their hosts, and a similar sum with food stores, rental car companies and excursion operators - “the whole nine yards”.
He added that the income received by rental hosts and others was injected back into the economy, increasing the velocity with which money circulated and helping to generate other jobs and economic activity.
The hotel industry, though, and others have called for the creation of a ‘level playing field’ between themselves and the vacation rental industry when it comes to regulation and taxation, arguing that the latter need to contribute to infrastructure maintenance and other areas.
Mr Raine, though, questioned whether other vacation rental websites, such as Vacation Rental by Owner and Bahama Rentals, would be as co-operative as Airbnb in dealing with the Government.
Suggesting that this would penalise “only one segment of the market”, he said Airbnb was already levying 7.5 per cent VAT on the Government’s behalf on website booking fees.
While this amounted to just $2 on a $30 fee, Mr Raine questioned the legality of the Government’s actions. “I don’t think the legislation supports them taking that fee,” he told Tribune Business.
“They charge this in the Republic of Ireland, and have given them a TIN (Taxpayer Identification Number), but that is supposed to specify a location. How can VAT be charged in Ireland? They’re charging me for something they’re doing in Ireland using their website.
“I know they need money, but that is really off the chart. I think they need to leave that alone.”