The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas' largest industry yesterday breathed a sigh of relief after the government agreed to an extended VAT transition beyond July 1 for pre-booked business.

Suzanne Pattusch, the Bahamas Hotel and Tourism Association's (BHTA) executive vice-president, said the magnitude of the 60 per cent VAT rate hike and limited adjustment times were among sector "concerns" discussed with the Deputy Prime Minister and Ministry of Finance officials on Monday.

In a note to industry stakeholders yesterday, following K P Turnquest's confirmation of the extension, Ms Pattusch said "material bookings and pre-bookings" made before September 30, 2018, will be treated at the existing 7.5 per cent rate.

As for group business, the BHTA executive said contracts agreed between now and July 31, 2018, for "any point in the future" will be honoured at the existing rate.

"The implications of the VAT increase of 4.5 percentage points, and the proposed early implementation date, were shared with the Deputy Prime Minister and financial secretary [Marlon Johnson]," Ms Pattusch wrote.

"We expressed concerns regarding the timeframes for the transition period as proposed, and its impact on important aspects of business; particularly group business, pre-booked business, contracted agreements made with third party sellers.

"We requested a reasonable transitional time to ensure that this business was not disrupted, and that agreements and relationships with global and local travel partners were not adversely affected."

The hotel and tourism industry appears to have got its wish, following the Deputy Prime Minister's confirmation and communication from the Ministry of Finance.

"We will work to effectively communicate to our travel partners, members and tourism industry stakeholders to achieve a smooth transition process with little or no disruption to this segment of our business model," Ms Pattusch said.

The Ministry of Finance, in its communication, informed the industry: "Any material bookings, pre-booked, pre-paid bookings, groups, contracts and agreements for travel, rooms, facilities and package deals made with the resort or with agents of the resort, third party sellers/bookers of travel/accommodations prior to September 30, 2018, for travel through June 30, 2019, will be honoured at the 7.5 per cent VAT.

"Groups: Any material bookings, pre-booked, pre-paid bookings, contracts and agreements for travel, rooms, facilities and package deals made with the resort or with agents of the resort such as third party sellers/bookers of travel/accommodation, between now and July 31, 2018, for any point in the future (post June 30, 2019) will be honoured at the 7.5 per cent VAT."

Details on both business categories will have to be send to the Department of Inland Revenue. Mr Turnquest, in kick-starting the Budget debate in the House of Assembly, yesterday said: "The hotel sector - the largest employer in the country and the nation's leading contributor to the economy - expressed reasonable concern about the considerable advanced bookings and group business that has already been contracted.

"To address their concern, we are issuing a VAT guideline that will allow the hotel industry to continue their invoiced bookings and group business at the current prevailing 7.5 per cent VAT rate through the end of September 2018 for all booked stays for which a deposit has been made. This will apply for stays up until June 2019.

"For clarity, this will include only the rooms, facilities and other packaged arrangements that are booked and invoiced during this period. This accommodation for the key export sector allows them to meet very important contractual obligations with minimal disruption. This will not apply to walk-ins, or to any reservations that are booked but for which no deposit is made. It will only be for rooms, facilities and other elements of a packaged deal."

However, the Budget yesterday came under renewed fire from the Democratic National Alliance's (DNA) deputy leader, Arinthia Komolafe, who said it pandered too much to the International Monetary Fund (IMF) and credit rating agencies.

"The proposed Budget has the fingerprints of international rating agencies and multilateral agencies; it is those people's Budget," she argued. "The Bahamas did not get in this position overnight, and the aggressive timeframe of three years for eliminating the GFS deficit (in time for the next general election), which is the driving force for the proposed significant increase in VAT, seems to be politically motivated rather than focused on the welfare of the people.

"This short-sighted plan highlights the need for statesmen/stateswomen that focus on the next generation rather than politicians that look to the next general election. The Bahamian people should not be made to correct this malaise in the time proposed by the Minister of Finance, which imposes an unnecessary burden on Bahamian taxpayers at the risk of disrupting the economy."