By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is being urged not to “kill the goose” that enables Bahamians to own part of the country’s largest industry through an over-zealous crackdown on short-term vacation rentals.

Bruce Raine, a long-time vacation rental owner and advocate who has now exited the business, told Tribune Business that “balance” is critical in the Department of Inland Revenue’s drive to push both Bahamian and foreign owners to register their properties via its portal.

While the tax authorities are, for the minute at least, asserting there are no plans to tax Bahamian owners - just foreign ones, and particularly those that rent out second homes for thousands of dollars per week - many believe registration is just a precursor to imposing levies on locals.

Mr Raine told this newspaper that the Department of Inland Revenue needs to approach the short-term vacation rental market “slowly and gently”, arguing that while the Government was entitled to a share of the revenues this had to be set at “fair” and reasonable levels. Otherwise, it would receive significant “push back” and some Bahamian owners will exit the market due to the extra cost and regulation.

Shunda Strachan, the Department of Inland Revenue’s acting controller, last week estimated that only 20 percent of existing short-term vacation rentals have complied with the need to register their properties with the tax authority. And, in addition, only 15 percent of the properties and owners who should be paying VAT to the Government are registered.

She explained that this level of non-compliance, and suspected revenue leakage, sparked the Department of Inland Revenue’s recent issuance of letters to property owners seeking their help to “get the arena in line” and report short-term rentals in their neighbourhoods. Many Bahamians, though, viewed the move as a “fishing expedition” and tax grab.

Mr Raine, who was among those to voice this believe, warned “there’s two sides to the coin”. He added that the tax authority must balance its registration and revenue drive with not deterring both Bahamian involvement in short-term vacation rental ownership and foreign demand for local real estate.

“I think they have to be very careful,” he told Tribune Business, “because the other side of it may be people are only buying properties here because they can rent them out at times that they are not here, and if you kill that goose people will not be buying property any more. You may be talking $1m, $1.5m and up.

“It’s not a good idea to strangle anyone. If people are putting money into the country, investing in the country, they’re entitled to earn something. The Government is, too, but this industry is creating money all around.” Mr Raine said short-term vacation renters typically spend monies in communities not normally touched by tourism dollars, purchasing supplies, eating at restaurants and using other services and amenities.

Asserting that the Government must be mindful of, and not neglect, this impact which also serves to boost VAT and other tax revenue streams, he added: “They’ve got to go slowly, got to go gently. People don’t mind paying what’s reasonable, but when you start to take a lot that’s when the push back comes and it can be severe.

“The reality is that people will accept it’s [taxation] fair up to a point. Once you go beyond that, they will start to look for ways to change it. We have been a tax haven for the wealthy since the late Sir Harry Oakes came here. If you tax people too much they are not going to come any more, and they contribute a hell of a lot....

“Balance is the right word. You’ve got to balance everything in life otherwise it’s a see-saw. They’re [the Government] not saving any gas by saying they are only doing it for foreigners. People don’t believe that. If they’re doing it for foreigners, Bahamians will be coming next.”

One financial source, speaking on condition of anonymity, told Tribune Business that the Department of Inland Revenue’s 20,000-unit estimate meant that collectively short-term vacation rentals are the biggest source of tourist accommodation in the country - greater than the hotel industry’s estimated 15,000 rooms.

As a result, they added that the motivation to regulate and tax the sector was easily understandable, but added that the tax authority was “going about it really, really clumsily” with its recent flawed notice to all taxpayers it had an e-mail address for and subsequent call for Bahamians to effectively ‘snitch’ on neighbours who have an undeclared vacation rental property.

Questioning why the Government simply does not approach listing platforms, such as Airbnb and VRBO, for help in both identifying Bahamas-based short-term vacation rentals and taxing them, they added: “I don’t think anybody trusts them because if they have you on the register they can come after you if they change their mind. What are they going to do if people don’t register: Shut them down?”

Meanwhile, Robert Sands, the Bahamas Hotel and Tourism Association’s (BHTA) immediate past president, told Tribune Business that the sector is satisfied with the Government’s progress to-date in trying to create a ‘level playing field’ between the industry and short-term vacation rentals despite the latter’s relatively low registration and compliance threshold to-date.

“I think the bigger issue is for the Association is the Government has taken action on some of our recommendations notwithstanding the percentage of those that are compliant,” Mr Sands said of short-term vacation rentals. “We believe it’s a work in progress and we are satisfied that the actions of the Government are heading in the right direction.”

Mr Sands reiterated the hotel industry’s call for a “competitive level playing field” that all elements in the Bahamian tourism industry can participate in and benefit from, with any increase in government revenues also likely to finance roads and other infrastructure that the sector - including vacation rentals - benefit from.

Acknowledging that the registration drive will require patience, Mr Sands added: “The positive thing is that they’ve [the Government] recognised the concern, taken the necessary action and they are now working on improving the percentage level of compliance. It’s extremely important. The level playing field is all we have been asking for...

“Persons visiting The Bahamas choose the methods by which they travel to The Bahamas, choose the accommodation they wish to stay in. The aggregate of the mix all contributes to a successful tourism industry, and no one sector should be disadvantaged by another. 

“That’s the call of the BHTA for a level playing field so that the competitive model is not eroded but also additional funding is made available and dedicated for the betterment of all of us - infrastructure, roads and subventions for marketing.”