Tuesday, June 28, 2022
Davis: 10% tax elimination ‘fell through cracks’
Duty-free ‘pleasure vessels’ for blue economy
By NEIL HARTNELL
Tribune Business Editor
A prominent marina operator yesterday voiced doubt that eliminating 10 percent Customs duty on so-called “pleasure vessels” will spark development of a yacht registry as envisioned by the Prime Minister.
Peter Maury, immediate past president of the Association of The Bahamas Marinas (ABM), told Tribune Business that this nation “has a long ways to go” to establish such a facility given the presence of other hurdles as well as intense competition from existing yacht registry jurisdictions.
For although the Government is eliminating the duty imposed on boats and yachts imported for personal use, the 10 percent VAT levy remains. This, Mr Maury said, was a higher tax rate than the likes of Jamaica, Bermuda, Cayman Islands, the Marshall Islands and numerous US states levy, with many electing to impose no taxation and simply charge registration and boat fees.
His comments came as Philip Davis QC, upon his return from the Commonwealth Heads of Government conference in Rwanda, confirmed that this newspaper’s instincts were correct by disclosing that the 10 percent “pleasure vessels” tariff is being eliminated to help develop a yacht registry and build the so-called “blue economy” that is based on the ocean.
The move was immediately attacked by the Opposition, who questioned whether the tariff change has any basis in law because it was not approved by Parliament during the Budget debate. Mr Davis, admitting this “omission” had been an oversight, said he will launch an inquiry into how this “fell through the cracks” now he has returned home.
“Let me just say that I did speak in my communication about reducing taxes on yachts,” Mr Davis said in response to Free National Movement (FNM) accusations that the Government sought to “sneak” through a tax break for the wealthy behind the Bahamian people’s backs. “We are intending to build a yacht registry to permit them to be able to house themselves in The Bahamas. Housing in The Bahamas means more for marinas, housing in The Bahamas means more opportunities for Bahamians to be more directly engaged in that maritime industry. One of our plans is to develop the Blue Economy.”
Mr Davis said the Ministry of Education has already partnered with the LJM Maritime Academy to provide scholarships for Bahamians seeking a nautical education at the latter, while there were commitments from the cruising and yachting industries - the latter “once they are able to have a home here” - to hire Bahamians certified by that institution.
“So this is all part and parcel of a bigger picture of growing the Blue Economy,” the Prime Minister said, then effectively admitting that the FNM’s charges over the 10 percent “pleasure vessel” tax break having no basis in law might have some merit.
“The question as to the manner in which the omission during the course of the Budget debate [happened], we’ll have to look at that and see how it fell through the cracks and how best to resolve it,” Mr Davis added. “I’ll do that now that I’m home.
“I’ll sit down with the minister of economic affairs [Michael Halkitis], the financial secretary [Simon Wilson], many permanent secretaries, the deputy prime minister and work out what has to be worked out to achieve the goal that we think is necessary for the development of our Blue Economy.”
Mr Maury said the 10 percent duty elimination may encourage Bahamian and resident boat owners to register their vessels locally, rather than adopt the practice of registering them in the US and elsewhere and bringing them in via a cruising permit that generates relatively minimal revenue for the Government.
This, he added, could also stimulate greater interest in boating and more work for repair yards and other businesses that supply goods and services to the sector. However, given that 10 percent VAT is still being applied, Mr Maury said the tariff elimination by itself was unlikely to stimulate the Prime Minister’s yacht registry ambitions by itself.
Noting that the marina industry has pressed for years for the “pleasure vessel” duty to be eliminated, Mr Maury said VAT’s introduction in 2015 lifted the effective tax rate to 17.5 percent. This then shifted to a peak of 22 percent when VAT was increased to 12 percent in 2018, before now reverting to 10 percent once again.
“The Bahamas Maritime Authority, the ABM and some others in the industry had a pretty good plan for a yacht registry,” he told this newspaper. “It was a little harsher than Jamaica’s because of the red ensign.” That expression refers to The Bahamas’ status as a quality maritime flag state, meaning that it has to maintain certain standards and cannot be seen as a ‘flag of convenience’.
Mr Maury, operator of Bay Street Marina, said this yacht registry plan had involved creating a registrant class known as “private limited yachts”, which was intended to capture all the foreign charter vessels that typically operate in Bahamian waters for three to four months of the year, enticing them to pay something here rather than where they are registered.
“For a yacht registry, registering yachts in The Bahamas, they’re not going to register if they have to pay 10 percent. That’s not going to make a big difference, that 10 percent elimination, because you still have to pay VAT. It’s not going to make much of a difference. There are too many other flags of convenience that are easier and cheaper. You can get a registration in 72 hours,” Mr Maury said.