The Tribune

• Blames 20% pt fall-off on VAT imposition

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Association of Bahamas Marinas (ABM) president says he has suffered “the worst Thanksgiving in 30 years” while linking the drop-off in boating traffic directly to VAT’s imposition on foreign yacht charters.

Peter Maury, who operates Bay Street Marina, told Tribune Business that he and other marinas across The Bahamas are “getting creamed” with occupancies over the Thanksgiving period - the US holiday that traditionally kicks-off the winter tourism and boating season - plunging from the traditional “high 80” percent range to between 60-65 percent.

Revealing that he himself has “lost eight big boats to the Caribbean” for the entire season, he blamed the decline in business on the Government’s decision in the 2022-2023 Budget to impose 10 percent VAT on all foreign yacht charters.

Mr Maury said many vessels, and their owners/operators, were being deterred by the process and bureaucracy around having to register the boat with Bahamian tax authorities and then submit the necessary filings rather than the payments and concept of VAT taxation itself.

“We’re getting creamed. It’s not good,” he told this newspaper. “It’s the VAT on the charters. All these guys have to register their vessels, and no one wants to do it. I’ve lost eight boats for the season so far to the Caribbean, all big boats. It’s terrible. I’ve never seen the marinas this empty at Thanksgiving.

“All the marinas in New Providence, even Harbour Island and Eleuthera, many of the vessels have skedaddled. It’s slow everywhere. You go on Marine Traffic, and all the boats are in the Caribbean. That’s what I always use as a gauge. Nobody has got a full marina right now. We’ll see how it goes. Hopefully it gets better, but so far this is the worst Thanksgiving I’ve seen in 30 years in the business.”

Prior to the Budget reforms earlier this year, foreign yacht charters were already supposed to pay a fee equivalent to 4 percent of the contract value to the Port Department. However, the Boat Registration (Yacht) (Amendment) Rules 2022 now effectively subject the industry to ‘double taxation’ by levying 10 percent VAT on the same contract. This more than triples the tax rate for yacht charters, taking it from 4 percent to 14 percent.

However, not everyone will be lamenting the increased taxation on foreign yacht charters. Bahamian tour and excursion operators, including the Bahamas Excursion Operators Association (BEOA), had for years been urging the Government to place them on an even taxation competitive playing field with foreign rivals who they argued were incurring a much lighter burden than themselves when it came to Public Treasury contributions.

And they also charged that the Government was missing out on significant uncollected revenues from the yacht charter industry as many operators were avoiding or evading payment of the 4 percent fee to the Port Department.

The Government agreed. Senator Michael Halkitis, minister of economic affairs, after the Budget’s presentation argued that the foreign yacht charter industry had for years “enjoyed a windfall at The Bahamas’ expense” by using this country’s marine environment and natural resources to earn millions of dollars without paying its fair share.

Dismissing arguments that the VAT hike on foreign yacht charters was too onerous, Mr Halkitis chuckled at suggestions the move would “kill” the sector. He recalled how private pilots had threatened to abandon The Bahamas, and instead travel to destinations such as Turks & Caicos, when the Government introduced a $50 fee for Customs processing of private planes.

Asserting that the reverse happened, and private aviation business had actually increased since, the minister said the Government had for years struggled to collect due taxes from foreign yacht charters via the 4 percent fee. “In terms of the yacht charters, that’s been a vexing problem as well,” Mr Halkitis said. “There is a 4 percent fee on the charter.

“They charge a fee to do the charter, and the Government is supposed to get a 4 percent charter fee. What we’re saying now is that these individuals have to register for VAT and we get VAT on the cost of the charter. Because the yachts are coming into our waters, they’re enjoying our environment, they’re making money, we feel justified in earning something from that. It’s our resources that are being used generate this money, so we think we should get something for it.

“We don’t think it’s onerous,” Mr Halkitis added of the 10 percent VAT levy. “We did some checks and found, for example, that if you do a charter in the Mediterranean the VAT is 22 percent and we’re charging 10 percent. We don’t think that will chase anybody away.”

Mr Maury, though, said the ABM and marinas are asking the Government to “reconsider” its taxation stance given the seeming impact on The Bahamas’ boating business. He added that they have proposed an alternative, which involves greater enforcement of the existing foreign yacht charter fee and increasing it by 50 percent - from 4 percent to 6 percent.

Reiterating that the ABM had collected $3.4m in yacht charter fees for the Public Treasury via its own online portal, he told Tribune Business: “That’s what we were fighting for; to raise the fee. Instead, they put VAT in. It’s complicating it. It’s the registration for VAT. It’s the whole point of registering the boats, and filing taxes quarterly. You have to register, and people don’t want to do that.”

Mr Maury said the 4 percent fee is paid by yacht brokers to the Port Department, but VAT registration has to be addressed and filed by the vessel’s owners. He added that despite informing boat owners they can offset the 10 percent levy against any VAT incurred on expenses “in-country”, clients were saying: “That’s not the problem. It’s the filing system, everybody is saying, rather than payment of the fee.

“We’ve asked them to reconsider. We recommended increasing the fee to 6 percent, going up 50 percent, and do a better job of enforcing it. Everybody agrees that not all are paying what they owe. But these boats, when in-country, spend $100,000 - just one boat - renting dockage, buying groceries, in hotels and casinos plus the Government gets the 4 percent charter fee.”

Mr Maury urged the Government to use the automatic identification system (AIS), which tracks a vessel’s position, to monitor yacht charter movements in The Bahamas - how long vessels stay and where they go - to determine how much they should be taxed and billed. He likened this to how The Bahamas is now levying overflight fees on planes using its air space.

“It’s very frustrating that they didn’t listen to us,” he added of the Government. “I’d normally be in the high 80s now [on marina occupancy]. It’s in the 60-65 percent range. Most of the marinas are like this. To me, it’s affected a lot of boats, a lot of marinas, which is unfortunate.”

Mr Maury recalled a conversation with one boat captain who had informed him he was going to the Caribbean, then the Pacific, and effectively bypassing The Bahamas. “I said: ‘I guess you’re not coming back here any time soon’. He said: ‘You probably won’t see me for a year’. He didn’t even stop for Thanksgiving. He stopped for fuel, and kept going,” he recalled.

“He headed for the Caribbean for charters after Christmas, and then will go to the Pacific. That’s more attractive. That’s the way it is.” Mr Maury said the ABM had offered to add registration and fee/tax collection functions to its own app, with all funds remitted to the Government, but the latter declined.

He also revealed that the ABM is no longer collecting the 4 percent yacht charter fee through its online portal, the Government having asked that this cease around three months ago because “they couldn’t reconcile the bank accounts”. Mr Maury continued: “We wanted to continue to do it, but they said ‘no’.

“It is what it is. They want to make business hard and life tough for Bahamians. That’s what they’re doing. They say they’re not, but that’s how it is. We’re just moving on. It looks like hurricane season now; not many boats. The worst part about it is that I’ll be OK in the marina, as I can cut back on staff, but there’s a lot of businesses - boat brokers and agents - this is the only business they have. All those people who were doing well are now not doing so well.”