The Tribune

• Blames decline ‘100%’ on VAT’s imposition

• Association chief: Sector facing ‘mixed bag’

• ‘Noticeable’ drop off in Harbour Island traffic 

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Nassau marina operator yesterday blamed increased taxation for a near-20 percent decline in Christmas yacht traffic, and warned: “We’re not competitive with anywhere else in the Caribbean.”  

Peter Maury, who manages Bay Street Marina, told Tribune Business the holiday drop-off had reinforced his belief that the Government’s decision to impose 10 percent VAT on yacht charters was “100 percent” responsible for the decline in business impacting other operators as well as his own facility.

Confirming that the Christmas/New Year period had continued the downward spiral first observed at Thanksgiving last year, he revealed there were “three regular customers sitting in Florida right now” because they did not have sufficient charter contracts to make a Bahamas trip financially viable.

Mr Maury, suggesting that many Family Island marinas will be especially hard-hit due to their dependence on yacht charters, added that the fall-out extends beyond his industry to reduced business for fuel suppliers, food stores and all entities responsible for providing provisions to these vessels while in-country.

Marques Williams, the recently-elected Association of Bahamas Marinas (ABM) president, yesterday acknowledged the yacht charter business was “suffering” but described the industry’s overall performance as “a mixed bag”. He explained that marinas cater to other business besides charters, adding that “stopovers” and small boats were both segments that remained strong.

Suggesting that the bigger picture must be accounted for, Mr Williams said: “It’s a mixed bag. There are some aspects of the business that have suffered; obviously the charter industry. However, there are areas such as stopovers and smaller boats that are still thriving. It’s not just clear cut.” Another source added of the tax hike: “That concerns just a sector; those that benefit from the yacht charters. That doesn’t apply to all the marinas and boating activities.”

However, the observations of other tourism operators appeared to validate Mr Maury’s concerns. Benjamin Simmons, proprietor of The Other Side and Ocean View properties on Harbour Island and Eleuthera, told Tribune Business that marina traffic at the tourism hotspot was “noticeably” down compared to previous years for much of the Christmas period and only ramped up in final days before New Year.

“The only thing that was noticeably different was the volume of pleasure yachts. In the lead-up to Christmas, there were noticeably not as many. It exploded briefly over the New Year, and then subsided again,” he revealed. “I don’t know if it’s fuel costs or the new taxation on yacht charter vessels. I’m not in the industry.

“We take the boat to Harbour Island every day for the school run and always pass the marinas. It was definitely noticeable; the difference from previous years. We normally see a fleet of vessels at those marinas, and it wasn’t there until New Year and a couple of days before that.”

Mr Maury had no doubts about the cause. A former ABM president himself, he told Tribune Business: “I can tell you all the Nassau marinas said the same thing: Our margins are down over last year. Period. The biggest thing is in the Out Islands, Exuma and places like that where the economy depends heavily on that business, it was noticeably down.

“Charter boats are constantly reprovisioning, but even the suppliers are saying they are not as busy as they were. You can go talk to the grocery stores, the fuel suppliers... everybody is saying volumes are down. But then you look at the likes of St Barts. A buddy of mine is in Grenada, and he said the food stores are running out of food because the yachts are buying everything they can.”

Implying that the Government’s decision to impose 10 percent VAT on yacht charter fees, in addition to the 4 percent levy paid by the Port Department, had driven business from The Bahamas to the Caribbean, Mr Maury recalled: “The Government told us: ‘Where are they going to go?’ They’ve proven to us they can go anywhere in the Caribbean.

“One captain of a 140-foot vessel pointed out to me that it’s now about $25,000 more per charter from the tax based on what he charges. If you’re paying around $150,000 for the charter, and have to pay an extra $25,000 (VAT and 4 percent fee combined), wouldn’t you rather save more and go to the Caribbean?

“The cost of fuel is cheaper in the Caribbean, and the cost to fly there is not much more. The groceries are generally cheaper. You get more bang for your buck. Everything is about bang for buck.” Asked how much marina traffic and occupancies had fallen off compared to prior years during the Christmas and New Year period, Mr Maury said the decline was around 18-20 percent.

Voicing concern for business volumes during the traditional peak charter season, which normally covers the months of February, March, April and into May, he added: “It was about 20 percent down over last year. I have three regular customers right now sitting in Florida because they don’t have a charter. Last year they had charters booked out for weeks, and stayed here. 

“They had enough charters to make sense to stay in The Bahamas rather than go back and forth. A lot of boats can’t pick up charters in the US because of their flag nation status, so they have to come to The Bahamas. Florida’s sales tax, at 7 percent, is half of what we are, though. People may go to the Cays this year rather than go to The Bahamas.

“It’s not competitive. That’s my point. We are not competitive with anywhere other part of the Caribbean, and are certainly not competitive with the US where food and fuel cost a fraction of ours. They’re half of what we are right now. I would think the more fuel, the more groceries that The Bahamas sold, the more VAT the Government gets.”

Not everyone shares Mr Maury’s and the marina industry’s view on the increased yacht charter taxation introduced with the 2022-2023 Budget. 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 competitive playing field with foreign rivals who they argued were incurring a much lighter taxation burden than themselves.

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. And Michael Halkitis, minister of economic affairs, agreed that foreign yacht charters had for years “enjoyed a windfall at The Bahamas’ expense” by using this country’s marine environment 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 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 only for the reverse to happen and traffic increase .

“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. 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 and others will likely beg to differ based on yacht traffic following the 10 percent levy’s imposition. The boating market was one of the first to revive post-COVID and help drive The Bahamas’ tourism rebound, as its clients tend to be higher-spending individuals who spread the wealth around by visiting different islands.

“I don’t want to lose one boat and nor do other people’s marinas,” he added. “Occupancies were down 20 percent compared to what they have been for Christmas and New Year. I don’t want to be down 20 percent. I want to be up 20 percent. Shouldn’t it be up for everyone? That would be my point now. These are food sales, these are fuel sales, electricity consumption, provisioning. We thought the plan was to give us all a chance.”

Mr Maury again argued that, rather than impose 10 percent VAT in addition to the 4 percent Port Department levy, and create what he described as “double taxation”, the Government should instead double the latter’s rate to 6 percent and improve enforcement. He added that Mediterranean countries were set to remove their own VAT levy on yacht charters after losing business to Croatia.