Leading hoteliers are expressing concern about implementing value-added tax (VAT) next July as there are still a number of “unanswered questions” surrounding it.
Baha Mar Senior Vice President of Governmental and External Affairs Robert ‘Sandy’ Sands thinks the July 1, 2014 implementation date is “doable”, if the government releases the legislation soon and satisfies the concerns of all major stakeholders.
“The country needs some type of strategy or initiative to garner increased revenue for the government. VAT is a way of achieving that,” he said.
“But certainly the implementation, management, administration and the rolling out of the program must have the full support of all the stakeholders or most of them at least for it to be effective.”
“The quicker we get to understand the full import of VAT, the more it will benefit all concerned. And we believe this can be achieved through continued dialogue and collaboration.”
Like Sands, Stuart Bowe, president of the Bahamas Hotel and Tourism Association (BHTA), said until industry stakeholders are able to study the draft legislation, the accompanying regulations and duty schedules, it is difficult to determine what impact would be on the industry. But he does think that adding VAT will increase guest service expectations, due to the product’s current cost.
“Businesses must be prepared for the transition, particularly on matters regarding inventory control, accounting, budgeting, new pricing formulas, filing procedures and calculating credit applications, software applications, and other technological considerations. There is much to do in a short period of time,” he told Guardian Business.
“We need sufficient time to understand the legislation and regulations once released, and to engage in constructive discussions with government on some of the details.
“Concurrently, we will share the legislation with our members and embark with government on an education and awareness program, so the broader business community understands the details of what is being proposed. Once the legislation is adopted, a massive training effort must be undertaken.”
Bowe revealed that the BHTA is particularly concerned with the readiness of the Family Islands and small business, which are above the anticipated $100,000 per annum sales threshold, due to limited resources and access to affordable expertise.
The cost of import duties is another concern raised to Guardian Business by the hoteliers. According to Sands, the government indicated they were prepared to look at a 17.3 percent reduction in duties across the board.
“Yes, that will help in some areas but some elements within our industry don’t attract duty at the moment. So we will just have to see how that pans out,” he said.
“With VAT, we think there is going to be some cost increases but there will also be a number of cost neutral impacts. We’re replacing room tax, which is 10 percent with VAT at 10 percent. That is cost neutral and that is one of the biggest elements to us. That is also very big for us, which help the cost to go down. The key to all of this is the level at which the government will reduce import duties and help the cost go down,” he said.
In its white paper on tax reform, the government is proposing that the existing hotel occupancy tax is replaced with VAT at a rate of 10 percent and the food and beverage sales in hotels will be taxed at a VAT rate of 10 percent. All other goods and services that attract VAT will do so at a rate of 15 percent. The government is expected to release the draft legislation and regulations that will bring the VAT regime into effect soon.
The Nassau Guardian
Published: November 11, 2013