By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian hotels yesterday hailed the private cruise island tax compliance crackdown as "a great first step" while urging that some of the funds generated be used to "fix tourism product shortcomings".

Kerry Fountain, the Bahama Out Islands Promotion Board's executive director, told Tribune Businessthat creating a taxation 'level playing field' between stopover (land-based) and cruise tourism was a move "in the right direction". However, he argued that The Bahamas needed to go further and "earmark" a portion of the revenues generated from the private islands to upgrading its visitor attractions and amenities.

Pointing to the most recent passenger survey commissioned by the Florida-Caribbean Cruise Association (FCCA), where six out of every ten interviewed wanted to return to The Bahamas for a land-based vacation, he added that the "cruise conversion conversation" will be elevated to a new level if this nation has a funding source to invest in improving Bay Street and locations such as New Providence's forts.

Mr Fountain told this newspaper it was "so very important to get it right on Nassau/Paradise Island", which he described as this nation's "flagship" destination visited by many of the 9.4m cruise passengers attracted to The Bahamas in 2024, as exceeding their expectations would entice many to return for a hotel-based vacation on other islands.

Speaking after Philip Davis KC, in unveiling the 2025-2026 Budget, asserted that the Government has been in talks with the cruise industry to ensure its private islands are paying their fair share and all sums due to the Public Treasury, Mr Fountain said: "Kudos to the Prime Minister and it's definitely a first step in the right direction.

"As you've heard me say on numerous occasions, every time the Government looks at how to increase its revenue intake as far as tourism is concerned, it's always our airline partners and hotels that are inevitably being asked to lift the tax burden.

"I think it's only fair that the cruise lines which leave the largest tourism footprint in the country, with 9.4m passengers, it's only fair that they now be asked to help the Government with its revenue intake. Having said that, I think there are further opportunities."

Mr Davis said tax compliance discussions with the cruise lines are focusing on the payment of VAT on all imports to their Bahamian private islands; the levying of VAT on "all services offered for value" to guests; Customs duty enforcement; the payment of work permit fees for expatriate employees. But Mr Fountain urged that a portion of the funds collected be dedicated to improving the tourism offering.

Noting that The Bahamas on average ranked around 22nd-23rd, out of 33 Caribbean nations, for the overall cruise visitor experience, the Promotion Board chief added: "I bring that up simply to say I would like to see some of the revenues the Government collects from these private islands... earmarked to address the cruise visitor experience.

"When I say cruise visitor experience, I'm talking about the cruise visitor product experience. It doesn't necessarily mean Junkanoo Beach, although we want to improve that experience, but improving the experience at Potter's Cay, the experience at Arawak Cay, the experience on downtown Bay Street. It's about sprucing up other direct attractions such as Fort Charlotte and Fort Montagu.

"I hope some of those funds are earmarked for product development and improvement." While the $2 tourism enhancement levy, which is imposed on all travellers, is dedicated to funding the Tourism Development Corporation, Mr Fountain said this agency was more focused on developing Bahamian tourism entrepreneurs and start-ups as opposed to upgrading the overall tourism product.

"I'm talking the physical plant," he added. "It's so very important to get it right on Nassau/Paradise Island, which is our flagship tourism destination. That's where most of the cruise visitors are going, and if they go to Nassau/Paradise Island and have a good old time, they will ask: 'What is beyond this?' and they will want to come back and visit some of our other islands.

"I think it's very important, yes, to approach the cruise lines to share in the tax burden, but say at the same time we are going to use some of the funds and earmark some of them to upgrade some of the product experiences. We shouldn't stop there [Nassau/Paradise Island]. Some of those dollars should also be invested in fixing shortcomings in Grand Bahama and the Family Islands.

"Then, when we start to have the conversation about cruise conversion, it becomes more realistic. We will have addressed the shortcomings, and the FCCA survey says as many as six out of ten passengers wants to come back for a land vacation. If these things are fixed we're talking about low-hanging fruit. That's why it's so important we fix the product the way it should be fixed," Mr Fountain said.

"In summary, kudos to the Prime Minister. It's a great first step. One step at a time but, at the same time, let's use some of the funds to fix the product shortcomings in Nassau/Paradise Island and then move to Grand Bahama and the Family Islands."

Robert Sands, Baha Mar's senior vice-president of government and external affairs, backed the Government's stance as outlined by Mr Davis. "I think that's a positive indicator that the Government is committed to levelling the playing field. I believe it's one of the first steps they are taking, and the hotel industry is certainly encouraged by that and we look forward to other measures they plan to take in the not too distant future.

"I think that whenever anyone benefits from tourism through the offerings of a destination then all parties should contribute to the benefit of the Bahamian people through some form of taxation so that the country grows, prospers and improves, and makes the environment even better for all participants in this industry.

"When The Bahamas is good to companies, then I think companies in turn should be prepared to pay their share of taxes and contribute to the overall development of the country from a humanitarian point of view as well."

The cruise industry's Bahamian private islands have been a focus for the Ministry of Finance, and Department of Inland Revenue, for some months. Tribune Business revealed in February 2024 how the Government was planning to end these destinations' then-nine year tax-free status by levying VAT on all goods and services supplied to millions of tourists who visit these locations annually.

Among the transactions set to attract VAT were the provision of food and beverage; recreational activities; equipment rentals; and spa services on cruise lines’ private islands. Lease agreements for the rental of space, or right to use a private island, would also attract the tax, as would goods and services provided to a cruise line where the location is operated by a separate corporate entity.

Cabana rentals, shore excursions or charging cruise companies for passengers’ access to on-island services would be caught by this, as would “the purchase of on-island recreational activities such as tours, excursions and other attractions from Bahamian suppliers. The resale of these recreational activities to passengers is also subject to VAT at the standard rate as the services are being rendered in The Bahamas”. 

Among the private islands that stood to be impacted were Royal Caribbean’s Perfect Day destination at Coco Cay in the Berry Islands, its global showpiece attraction; plus Mediterranean Shipping Company’s Ocean Cay location; Disney Cruise Line’s Castaway Cay and Lighthouse Point; and Holland America’s Half Moon Cay. Carnival's $600m Celebration Key would also be caught in the net.