The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Ministry of Finance’s top official yesterday argued the tourism industry can pay “a little bit more in taxes without hampering its viability as vacation rentals came under the microscope once again at a sector gathering.

Simon Wilson, the financial secretary, pledged to the Bahamas Hotel and Tourism Association’s (BHTA) second quarter Board of Directors meeting that “we will not do anything unless we have a consensus position” with the industry as he voiced hope that further discussions with the Government will take place this year.

No indication was given as to what tax reform options the Ministry of Finance may be considering, and Robert Sands, the BHTA’s president, urged that the Government be “considerate” and avoid imposing any new and/or increased taxes given that The Bahamas’ largest industry is already “contributing our fair share and more”.

Mr Wilson, kicking-off his presentation, said: “The Ministry of Finance is endeavouring to have a fair and equitable burden of taxes by all sectors of the economy. There’s no effort to target a particular sector. We want to ensure the rules are applied fairly across the sectors and across the economy.

“The Government’s fiscal position is well known, and we are of the view that in the tourism sector there is capacity for a little bit more contribution.” The finance official later repeated this notion, although he promised that the Government will introduce no measures that cause economic hardship or disruption for the country’s main growth and jobs driver.

“My final point is: What is the future?” Mr Wilson said. “We believe that there is room, or elasticity using a technical term, for additional revenues without hampering the sector. We want to work closely with the BHTA. I think we started some discussions prior to the Budget with Mr Sands about some of that. We want to continue those discussions, hopefully before the end of this year, so we can have a consensus on what is the way forward.

“We will not do anything unless we have a consensus position from the sector on what is appropriate because we realise the sector is very important to the economy. We want to make sure there is an agreed upon position.” Despite Mr Wilson’s soothing conclusion, many in the private sector and wider economy are likely to take the comments as confirmation that the Government is on a continuous revenue and taxation grab.

The financial secretary touted the Large Taxpayer Unit, which should be created by early fall 2023, as a mechanism to provide better, more efficient services to the large hotels included among the Government’s 50 largest taxpayers who collectively “account for half the revenue we collect”.

“I think the most important initiative we have now is the focus on providing services to large taxpayers,” Mr Wilson said. “Many tourism-related entities fall into the country’s largest 50 tax-paying businesses who account for a disproportionate amount of our revenue. We have 50,000 businesses registered, and 50 of them account for half the revenue we collect.

“We believe those businesses require, I wouldn’t say a greater level of service, but more efficient services. It’s so critical to our fiscal outcome. We are in the last stages of creating a Large Taxpayer Unit, and those businesses will be registered to pay VAT not in 21 days, like smaller businesses, but a shorter timeframe.

“In each case we will contact the business directly to understand the benefits of being included in the Large Taxpayer Unit so they don’t just think this is an attempt by the Government to get funds quicker from the Large Taxpayer Unit, which we’re hoping to establish by early fall.” Robert Sands, the BHTA’s president, said industry members who fell into the 50 largest taxpayers are looking forward to the “one stop shop” the unit will offer.

Mr Wilson said the so-called “hotel condo tax”, designed to ensure that all units in a hotel rental pool contribute something to the Public Treasury, had been implemented relatively smoothly and “to-date, I don’t think there’s a particular challenge”. He added that the reform, which levies real property tax on vacation rentals if a VAT threshold is not reached, was intended to eliminate “a tax break without any revenue offset”.

The financial secretary, joined by Department of Inland Revenue officials, said the Government has enlisted the help of Avenu, a company that aids US local government authorities in tax administration, to assemble data on almost 10,000 Bahamas-based vacation rental properties using information available via listings websites such as Airbnb and VRBO.

This, they added, has secured details on room rates, occupancies and annual revenue earnings going back as far as 2015 for some vacation rental homes. “We feel very confident we are going to see a significant uptick in revenue from this programme,” Mr Wilson said.

Shunda Strachan, the Department of Inland Revenue’s acting controller, said the agency has approached the vacation rental market “from two directions”. Describing Avenu’s work using available information as “through the back door”, she added: “We’ve opened the door for those property owners to come and register.

“We’ve already gathered a lot of the information..... to tell us what is going on in that market. We expect to gain considerable revenue from that area that we’ve not been able to get in previous years because foreign owners were not paying VAT and the property was not registered for property taxes. We’re going to close in on that market this year.”