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Gov’T Plans Threaten To ‘Kill’ Vacation Rentals

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

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.”

Comments

TalRussell 3 months, 2 weeks ago

Comrades! Tax or no tax -why should we allow these kinds rentals to visitors?

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BahamasForBahamians 3 months, 2 weeks ago

Lady Tal.. excellent show yesterday. Are you suggesting these vacation rentals should be scrapped, totally?

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TalRussell 3 months, 2 weeks ago

Comrade BahamasForBahamians, not for a second - should we allow the crazy idea to allow Airbnb to establish a Visitor Rental Beachhead in the Bahamaland. In fact, our own people should likewise be restricted when it comes to whom and what they can rent out to Visitors. What we don't need is a Free for All Rental of Accommodations to Visitors.

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whybahamas 3 months, 2 weeks ago

Your ignorance on this is truly astonishing.

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aconcernedresidentofnassau 3 months, 2 weeks ago

Do you understand how Airbnb and Homeaway operate? It is just a booking service, they do not own any properties or manage them. Property owners list their property with photos, prices etc. A traveller who wants to come to, for example, The Bahamas, will look to see what properties are available and choose the best one for their purposes. The "Guest" puts in a request and the "Host" then accepts or declines. Airbnb charges a small fee to the Guest and 3% to the Host. Airbnb handles the financial transaction. When the Guest leaves, both the Guest and the Host provide reviews so it is self-policing. This type of tourism appeals to a different market than the hotel guest. Personally we use Airbnb when we travel as we have young children and we want a house or apartment with a kitchen, space and facilities like washing. Hotels are expensive and very inconvenient for families with children. The hotel operators need to realize they are in a different market segment and need to provide a better value proposition anyway. If you look at the properties listed, the prices are typically $200 to $400 per night, but often with a 20% discount for bookings of a week or more. Hosts cannot rent every night of the year - they need to have a minimum of one day between rentals and there are periods of the year when tourist are rather scarce. As an example, a place listed at $300 per night actually translates to an average of $232.50 per night after the weekly discount and the 3% Airbnb fee. Let us assume the property is rented a lot - 45 weeks (which requires some 50 days empty because of cleaning, repairs etc. This is revenue of just under $75,000. The occupancy I have assumed is VERY high and most properties will not be so fully rented. After costs for insurance, property tax, maintenance, cleaning etc, there is not much left over. But the rental income circulates in the economy and the remainder is invested locally (most properties are owned locally). Then you have tourists spending money which is good for the economy and includes some VAT. Also, there is departure tax. This new business model complements the hotel/resort offerings, rather than competes with it.

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TalRussell 3 months, 2 weeks ago

Comrades! Airbnb seems to have succeeded at winning you over that they are a not a company on a mission of turning Bahamlander's residential zoned neighborhoods into 'Motel Row'. Maybe you need ask your neighbours what they think about an ever changing stream of strangers taking over their neighbourhood? They invested in a residential dwelling - not 'Motel Row'.

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Groidal 3 months, 2 weeks ago

Not to worry, the subhuman jetski operators will do their best to continue to attack and rape tourists here in the Bahamas to the point where AirBnB won't have a market for their rentals

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C2B 3 months, 2 weeks ago

Absolute nonsense!!

Ireland is a renegade taxation republic offering reduced taxes for corporations willing to relocate there. They use their proximity to the EU to attract western companies. Taxes are due where the service is rendered. That is here not in Ireland.

I have been renting here for 4 years and have had 3 foreign landlords all paid in USD! No Bahamians! The Bahamian government has to buy USD for me to pay the rent. The rent leaves the country and has no benefit for this Country. Enough about the local entrepreneurs; they can offset the VAT against what they pay. They also represent the minority of landlords and this banker nows it.

Newsflash for Mr. Raine: The price conscious traveler stays away from here. Period. It's cheaper to visit Manhattan.

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TalRussell 3 months, 2 weeks ago

Comrade C2B, Bahamaland has lots offer - we just need get back to the basics - our people.

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