By ANNELIA NIXON

Tribune Business Reporter

anixon@tribunemedia.net

Short-term vacation rental owners must be incentivised to register their properties with the Department of Inland Revenue and pay any VAT that is due, a realtor argued.

Kyle Barnett, a real estate agent with Condo Vikings and Jolie Luxury Homes, said many owners - both foreign and Bahamian - are likely reluctant to register with the Bahamian tax authority for fear they will immediately be hit with a large tax bill that erodes their income and profits,

Speaking after Shunda Strachan, the Department of Inland Revenue’s acting controller, estimated that 20,000 vacation rentals are not registered, and “only 15 percent of the properties and owners who should be paying VAT to the Government are registered”, he argued that the Government should offer incentives to speed up this process.

“So how else could you get persons to register?” he asked. “They would register through incentive programmes, and they would want to show that they’re making over $100,000 to be a part of whatever programme is being offered.”

Referring to the notice sent out by the Department of Inland Revenue, seeking to identify short-term vacation rental properties, Mr Barnett added: “So the letter was a bait and something to get the conversation started, because they probably didn’t have any other means to contact and to be sure about who they are contacting.

“Even if they want them to register, the person is going to say to themselves: ‘I don’t want to go through the headache of even registering, because I use this home for myself. I have my private website’. You can’t tell a person that they can’t invite a visitor to their own home, or they can’t invite a friend or family friend into their house. That’s why Airbnb got so popular.

“It’s a little strange. How could the Government say: ‘No, I can’t invite you to my house to sleep for three days.’ Like, it’s a family, or you’re renting your room out to a friend. They’re [vacation rentals] filling a gap in the market that’s needed. And based on something I read before, I remember Robert Sands... he even mentioned that at some point there won’t be enough hotels to accommodate guests,” he said.

“So why not let persons who are willing to risk capital and create more markets into this sector. The incentive would be to give them benefits from the Hotels Encouragement Act, where everybody could register on the portal. And if they register on the portal, they’ll receive these incentives that also hotels would receive.

“If you bring in goods relating to your condo apartment, your short-term rental, these things would be VAT-free. So it has to be a give and  take in order for a person to say: “Oh my goodness. I want to register on this portal so I can receive these benefits’.”

Mr Barnett said foreign second home owners who opt to rent out their home during the months they are not in The Bahamas may be hit with taxes they did not initially bargain for. “Whoever is responsible for paying VAT, should pay VAT. The law is the law. That one, you can’t get around. If it’s a law and you have to register your business, and you’re running a business, any business should be registered,” he added.

“But persons who purchase a home with the idea that they are going to - when they’re not visiting The Bahamas - they’re going to just rent it out, they may see it as a measure of trying to tax them unnecessarily. Or they’re going to look at it as an additional cost they didn’t buy into from the beginning.

“So persons prior to all of this may have a lot of resentment or negative connotations towards it, because this is something that wasn’t established in the beginning. Or maybe it was established, but maybe they weren’t just following the rules, and now the rules are being applied. So, that’s why, from the beginning, the Government needs to be strict on whatever rules are in place,” Mr Barnett said.

“It’s almost like real property tax. Real property tax was never being enforced, and now the Government started enforcing real property tax. It took some time, but everybody came around and realised you need to pay real property tax. So it’s just a conversation that needs to happen with this area.”

Mr Barnett warned that the Department of Inland Revenue must be careful about how it gets property owners to register as heavy-handed tactics may cause many to sell their homes and erode room availability for tourists.

“If they [Department of Inland Revenue] try to fine them [short-term rental property owners], if they try to have consequences by taxing them more, it could create persons just wanting to sell,” Mr Barnett said. “It could create less demand, where tourists can’t even visit because there’s not enough rentals in place for tourists to go because there’s not a lot of hotels. So they won’t be able to supply that demand.

“The reason why tourism has increased year-over-year is because persons who have visited see there’s a demand for more tourist-related accommodations. That’s the only way tourism was able to rise to the level it is right now...... I don’t see this as something where you should discourage it. The conversation, because they’re our partners, they’re filling a gap, so it has to be with those persons who own it.

“It has to be with who owns vacation rentals. The conversation has to be met with them, too, to ensure that it’s a fair trade, where now it’s being incentivised properly, where persons are encouraged to register, and even it would be registered on the Government’s official website as these are the rentals available in these Family Islands and everywhere.”