By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s lead senator yesterday urged the Government not to “put an onerous burden on Bahamians by fishing for taxes” amid expectations it will shortly clarify its vacation rental compliance drive.

Darren Henfield told Tribune Business that, after voicing concerns over the letter issued by the Department of Inland Revenue and its US consultant during Monday’s Senate debate, one Cabinet minister who was present indicated a media statement would be released to clarify that Bahamian vacation rental owners are not being targeted for taxes.

Michael Halkitis, minister of economic affairs, did not respond to this newspaper’s inquiries before press time last night, but Mr Henfield said that - in response to his concerns - the Government’s leader of business in the Senate signalled that the letter was designed solely to encourage owners to register their properties with the Department of Inland Revenue where Bahamians are concerned.

The push to target “delinquent short-term rentals”, the Opposition senate later added, was said to apply only to those homes and properties owned by foreigners when it came to non-payment of taxes. However, the actual letter made no distinction between Bahamian and foreign-owned vacation rental properties, and appeared to be a blanket ‘tax grab’ or “fishing expedition” impacting all who received it.

The document, which was e-mailed out by the Department of Inland Revenue and its US consultant, Avenu Insights & Analytics, also contradicted the position taken by the Bahamian tax authority as recently as 2023 when it eased the compliance requirements for local vacation rental owners. Registration was only required if a property generated more rental income than the annual $100,000 VAT threshold.

Speaking at a Bahamas Hotel and Tourism Association (BHTA) Board of Directors meeting, Department of Inland Revenue (DIR) representatives said Bahamian vacation rental owners would only have to register for, and charge, VAT to guests if their annual rental earnings meet or exceed the $100,000 threshold. And a Business Licence would only be required if the property in question is operated and held under a corporate entity.

No press release or clarification had been received from the Department of Inland Revenue, Ministry of Finance or any government entity prior to press time last night, although a spokesman for the former agency told Tribune Business on Monday night that one would be forthcoming today.

The discrepancies between the Department of Inland Revenue’s 2023 position and the letter’s contents, and the indication there is no intent to tax Bahamian short-term vacation rental owners despite clearly suggesting there was, is likely to erode confidence in the tax authorities.

Bruce Raine, who has exited the vacation rental business, told this newspaper: “It’s so ridiculous. They just can’t seem to get it right, and keep getting in hot water. This whole government is a puzzle now.”

Another contact, speaking on condition of anonymity, said of the letter: “If you’re going to fish you have to let the public know. My first reaction to receiving it was that it was a scam. There was no personalisation of the letter.

“I’m almost certain that the Department of Inland Revenue can distinguish between Bahamians and non-Bahamian persons. It was really sloppily done in my view. It made no qualifications at all. It’s just horrible management.”

Mr Henfield, meanwhile, asserted that he was “really disturbed” to see that the compliance letter had been issued by a foreign company “without warning to the Bahamian people”. And he argued that the Government, rather than focus on taxes and revenue income, should instead “incentivise” Bahamian ownership in a key tourism industry segment that is “a part of their patrimony”.

“My concern is really that it came from a foreign entity without any notice to the Bahamian people,” the Opposition’s Senate leader blasted. “I also feel strongly that any short-term vacation rentals provide an opportunity for Bahamians to be part of a shareholder society in terms of ownership of the tourism industry and literally take part in their patrimony outside the large hotel complexes.

“It really disturbed me to see it come from a foreign entity without warning to the Bahamian people without saying what was anticipated, what were the objectives, whoever they had to report back to at the Department of Inland Revenue and the Ministry of Finance on this fishing expedition.”

Detailing the Government’s response, which came after he finished his Senate presentation on the land reforms, Mr Henfield added: “When I completed my intervention, the minister of economic affairs, Michael Halkitis, who is a good guy, stood up and indicated this is not intended to tax Bahamians in the short-term rental business with listings on Airbnb and VRHO.

“He gave an undertaking that the Department of Inland Revenue would put out a statement to that effect; that this was to determine who has such properties so they could be registered but not to tax. I stood up behind him and said: ‘I understand you’re taxing foreigners, second homeowners who are not being transparent and seeking to avoid paying taxes. Are you taxing Bahamians?’ He said: ‘No’.”

Mr Henfield continued: “Even now, sending out this letter, I think the backlash has forced them to pull back. We see visitors now walking around local communities, and I’m happy to see Bahamians get a part of their patrimony. This incorporates domestic tourism, people coming from the Family Islands to stay in Nassau.

“People who are retired, and especially retirees, have some property they can make money from. It’s my view that the Government should assist people getting involved in this industry rather than put an onerous burden on them by fishing for taxes.

“I spoke to someone today, and it may be that they sent this e-mail and letter out to everyone on record at the Department of Inland Revenue. That’s what it seems like. I find that strange. When I saw the letter I expected to see something come out on social media saying it was ‘fake news’. It was incredulous to me that a foreign entity was sending this out to Bahamians without warning. That’s incredulous to me.”

The Department of Inland Revenue, working with Avenu, issued the letter that Bahamian property owners started to receive last week as part of a review of “taxpayers’ compliance with the tax laws” of this nation.

The letter, which has been obtained by this newspaper, says the assessment’s “primary purpose” is to identify short-term vacation rentals that are either operating without a valid Business Licence or failing to levy, collect and remit VAT on the rent paid by tourists to the Public Treasury.

It adds that those receiving the letter are being targeted because “a recent review” indicates they either own, and/or have advertised and listed, a short-term vacation rental without it being registered with the Department of Inland Revenue and Ministry of Finance.

Even those who have been targeted incorrectly, and do not own a short-term vacation rental property, are required to reply to the Department of Inland Revenue with “a written statement describing your circumstances”. Also, property owners who are registered and fully paid up-to-date with their taxes, will now have to submit proof of this to the tax collection agency.

Persons who are non-compliant are being given just seven business days to complete the registration process. They will also have to provide a copy of their rental agreement; real property tax certificate; and a “consent letter” from their community’s developer or copy of its “ordinance”. The latter is likely designed to check compliance with zoning regulations.