Tourism boss welcomes “lengthy overdue” Airbnb tax hike of USD 31 million

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BY NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The President of the Bahamas Hotel and Tourism Association (BHTA) yesterday evening welcomed the government’s offer to extract a $ 31 million extract from the rental market in order to “level the playing field”.

Robert Sands told Tribune Business that the Minnis administration’s sales tax crackdown was “long overdue” as it ensured that the 12 percent levy on the rent actually paid by visitors and on commissions for online marketplaces like Airbnb will be raised.

The BHTA chief spoke out after the Prime Minister announced that the government was amending the VAT law to make it absolutely clear to Airbnb and its competitors that taxes must be levied “on the full value of rent.”

Dr. Hubert Minnis described the move as part of an effort to achieve “greater equity in state taxation” as follows: “This means taking steps to standardize taxation so that all parties can pay their fair share and all companies can compete in a market level playing field.

“My administration has made several statements about the untapped potential of the vacation rental market and the millions of tax dollars that are missed each year. We’re changing the law to make it clear that all vacation rental marketplaces like AirBnB and VRBO will have to pay VAT on rents and commissions.

“The marketplaces that currently charge VAT have interpreted the legislation in such a way that it only applies to the commissions paid. The clarification in the law will make it clear: VAT is charged on the full value of the rent, ”he added.

“By changing the needs of the vacation rental market, as mentioned earlier, we estimate government revenues at $ 31 million.” Mr Sands reiterated yesterday that the hospitality industry has long called for such a tax “level playing field” between itself and the rental market, which has grown rapidly before COVID-19 and is likely to resume later.

“I think we welcome the government’s proposal to level the playing field,” he told the newspaper. “We believe this will go a long way in generating additional revenue for the government, and it will also create opportunities for the government to provide additional funding for the tourism sector to support the airlift and for consolidation and recovery of tourism to market.

“That is long overdue. We understand that taxes have already been paid on commission, but commission and the cost of the stay are welcome news. This is a position our sector has taken for the past four to five years and it is welcome news for us. “

The vacation rental market has long been seen as a source of increased local entrepreneurship and to allow Bahamians greater participation in the country’s largest industry, tourism. A landlord told Tribune Business yesterday that he was less than impressed with the government’s tax collection.

“You can’t seem to let this one go,” said Bruce Raine. “In all of these things, the people who pay the tax are the people at the end. What will happen is that we will compete for tourists with other markets. If the Airbnb guest has to pay an additional 12 percent of full value, we can either try to get a higher rate or soak it up and carry it ourselves.

“It makes it more expensive for the guest and we’re not the only place that has this. We have Cayman, Turks & Caicos and they are way cheaper than us in my opinion. It’s always the little people who get knocked down. There are a few wealthy owners, but most cost between $ 70 and $ 200 a night. You add $ 24 to $ 200 and suddenly you’re at $ 225 and we’re already expensive. “

Dr. Announcing yesterday that vacation rentals are rebounding more than many other segments of the tourism industry, Minnis said, “In real estate, short-term rentals in the Airbnb market have shown signs of recovery since our US tourism sector carefully reopened in November.

“The occupancy rate has more than doubled from 8.2 percent in November 2020 to 16.6 percent in March 2021. At the same time, average daily rents rose by 2 percent and room reservations rose by 52 percent.

“Based on data from the central bank for the period at the end of March 2021, rentals of holiday homes and comparable hotel offers rose by 65.9 percent and 55.4 percent, respectively. This also affected average daily room rates, which also rose 10.8 and 7.5 percent to $ 497.95 and $ 169.36, respectively, for vacation home rentals and hotel listings. “

Among other tax measures introduced yesterday, the government is increasing the excise tax rate on cheroots and cigarillos to 220 percent, or 50 cents per stick, to bring them in line with the value of traditional cigars.

“We are also amending the VAT Act to support companies that, due to the nature of their business, tend to take a habitual credit position with the Treasury Department,” added Dr. Minnis added.

“We are codifying provisions that were previously just VAT rules and that allow us to use appropriate accounting policies to address VAT liabilities without putting companies into an unsustainable cash flow deficit.

“This will avoid the situation where some groups of companies, even when in a credit position, will have to spend significant amounts of money waiting for a refund from the Treasury.”

Regarding real estate tax, he added that around 14,000 properties were added to the tax list, “adding $ 9 billion to the value of taxable properties. This is expected to result in a $ 14 million increase in property tax revenue. “