By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister and an ex-Cabinet minister yesterday traded blows over the Government's plan to increase the taxation rate on foreign charter operators by 350 percent in the upcoming 2022-2023 fiscal year.

Philip Davis QC, taking a swipe at marina operators as he led-off the 2022-2023 Budget debate, accused them of often giving "tacit approval" to the competitive disadvantage suffered by Bahamian-owned tour and excursion operators who presently face a much higher tax burden than their foreign rivals.

"One of our goals in this government is to move towards a tax system that is more efficient and more equitable. We have already begun ensuring that a greater share of our revenues will come from those who can afford to contribute more with our Revenue Enhancement Unit, which is particularly focused on increasing the yields on our real property tax," he said.

"Another example is the amendments we have tabled to the Boat Registration Act to make it clear that foreign yacht charters are subject to VAT in this jurisdiction. This is an important step, as Bahamian-owned charter operators have to pay Business Licence fees and have to charge VAT, plus Immigration fees for any foreign crew members.

"The playing field is now level. We are watching this sector closely. Too often, Bahamian operators are disadvantaged, often with the tacit approval of marina operators who benefit from foreign yacht charters."

Foreign yacht charters are already supposed to pay a fee equivalent to 4 percent of the contract value to the Port Department. However, reforms to the Boat Registration (Yacht) (Amendment) Rules 2022, which were tabled in the House of Assembly last Wednesday, effectively now subject the industry to ‘double taxation’ by levying 10 percent VAT on the same contract.

This more than triples the tax rate for foreign yacht charters, taking it from 4 percent to 14 percent, and Peter Maury, the Association of Bahamas Marinas (ABM) president, warned that these reforms will “kill” an industry that last year directly injected $122m into the economy.

He yesterday found a supporter in Kwasi Thompson, former minister of state for finance in the Minnis administration, who said: "Here is another concern. The Association of Bahamas Marinas have already expressed their strong concerns with the tax on the Yachting industry. They say the legislation is devastating for the yachting industry in The Bahamas.

"The tax on chartering a yacht in The Bahamas has risen by 350 percent, from 4 percent to 14 percent. It employs thousands of Bahamians in marinas and in other businesses that cater to these yachts. Will we lose this important industry to other destinations in the Caribbean, where there is a 0 percent tax on the yacht rental?

"They are begging the Government to take another look at this, especially those representing Family Island communities, to please reassess this 350 percent tax increase. They say their lives and livelihoods are depending on it."

Mr Maury last week said such a hike threatens to undo the increased boating/yachting market share that The Bahamas has enjoyed since the start of the COVID-19 pandemic. Warning that the Government’s move will “drive them right back to the Caribbean”, the ABM chief told this newspaper that combined data from 55 Bahamas-based marinas showed that the sector accounted for 37.3 percent - or more than one-third - of total tourism revenues generated in 2021.

Mr Maury based this on the total $327.438m total revenue generated by Bahamian tourism in 2021 - a statistic that he said came from the Ministry of Tourism. Asserting that it showed the marina sector had “made huge strides” in efforts to bring more boats and yachts to The Bahamas, and create jobs and entrepreneurial opportunities for locals, he argued that it could all go to waste due to what he described as a tax grab by the Ministry of Finance.

However, his concerns were vehemently rejected by Senator Michael Halkitis, minister of economic affairs, who 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 to the Public Treasury.

Dismissing arguments that the VAT hike on foreign yacht charters is too onerous, Mr Halkitis chuckled at suggestions the move would “kill” the sector when addressing the weekly press briefing given by the Prime Minister’s Office. 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.

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.”

Almost anticipating Mr Maury’s response, the minister recalled the previous furore over the $50 private aviation processing fee and the failure of ‘doom and gloom’ predictions to become reality. “People say: ‘Ok, if you do this, it’s going to kill the charter industry’, right?

“We don’t think so. As a matter of fact we think, and I say it here, individuals have been having a windfall for a long time at our expense and we feel it’s time we get what we think is our fair share. We have a a beautiful environment, and have to preserve it and maintain it. Anywhere else in the world you have to pay. Give us our little thing.” Research by this newspaper showed the VAT rate on charter fees in Greece and Spain are 24 percent and 22 percent, respectively.

However, Mr Maury argued that the Mediterranean VAT charter rate was actually 17 percent. He added that, when this was imposed, many countries in that region “lost half their business” to Croatia. The ABM chief also asserted that it was misleading and inappropriate to compare The Bahamas to the Mediterranean, given the distance between the two, and because this nation’s real competition is the Caribbean.