By NATARIO McKENZIE
Tribune Business Reporter
AN Out Island boutique resort operator says the government’s vacation rentals tax plan “only solves 25 percent of the real problem” and is “not the way to go”.
Edwin Mulford, a long-time Cat Island operator, said requiring online marketplaces to pay value-added tax (VAT) on their rentals and related sales in The Bahamas may only capture half the bookings that involve The Bahamas.
Arguing that small Bahamian resort operators such as himself are being most impacted by vacation rentals, he said: “I find it unbelievable that government is going this way, and I am very disappointed as this solves almost nothing. It will create some jobs by having to now monitor a broken situation from conception.
“How would you like to be in charge of auditing over 4,000 rental properties in The Bahamas? Further, how will this work? The homeowner is the entity that’s making the money, not the likes of HomeAway. It’s a tall order to expect a cheque from them for 12 percent every three months. Further, how can a foreign entity that has no holdings, nor a business licence, register for VAT and get a TIN number.”
KP Turnquest, deputy prime minister, last week said the VAT Act required all e-commerce and digital providers to register and pay the tax if the goods/services were consumed or accrued here in The Bahamas.
However, Mr Mulford continued: “If this does pass then the likes of Airbnb and Home Away would pay 12 per cent on their bookings as well as 12 per cent on 10-15 per cent commissions from their bookings, which will be a lot of money.
“To say they send government VAT on the rentals themselves, and another payment of VAT on their proceeds, I believe is cumbersome and not well thought out, period. This may be half of the bookings that, in reality, come through The Bahamas.”
Mr Turnquest, in unveiling the 2019-2020 budget, said: “The recent growth in the vacation home rental market has attracted the Government’s attention for several reasons. Understandably, the preferred type of accommodation for tourists globally has taken a turn from hotels to short-term rentals.
“For the most part, these rentals are facilitated using a marketplace such as Airbnb, HomeAway and VRBO, among others. We are pleased to see the market growing in this way, as it presents opportunities for many Bahamians to create a new stream of income, while adding capacity to our number one industry.”
He added: “We are, however, mindful of the uneven playing field that this has created concerning hotels and have moved to level the playing field. As such, all online marketplaces that advertise and facilitate vacation rentals in The Bahamas will now be required to pay VAT on their rentals and related sales in The Bahamas.
“Thus, companies such as Airbnb, HomeAway and all such marketplaces with short-term rentals in The Bahamas will be required to pay VAT. I can advise today that some of these online marketplaces have already become VAT registrants and have been paying VAT, and we are in the process of ensuring that the outstanding e-commerce service providers are made compliant.”
Mr Mulford, though, reiterated: “This is not the way to go, as it is only solves maybe 25 per cent of the real problems that exist. While the Government notes that vacation rentals are taking from hotels globally, I would say in reality it’s hotels like us, small independent ones, that are most affected.
“Levelling the playing field, they say, is hypocrisy. It will never be level until there are some zoning changes implemented immediately or small hotels like us will have close or switch to private home rentals.
“In my case I could do this as we have all individual cottages, but not all have this advantage. Most of the Family Islands will then be home rentals only with no more hotels, which is very bad medicine.” Mr Mulford also argued that Bahamians should be given favourable incentives to operate in the vacation rental space.