Prime Minister Announces 7.5% VAT Rate:
Effective Date January 1, 2015
- Lower Rate Welcome and Extends to Lowering of Room Tax
- BHTA Following Up on Outstanding Issues Impacting Competitiveness
- Draft Legislation to be Released in Coming Weeks
Prime Minister Christie announced yesterday in his annual budget communication that Government will introduce Value Added Tax at 7.5%, down from the 15% originally proposed. The 10 percent hotel room tax, which will convert to a VAT, will be reduced to 7.5% as well. The legislation will come into effect on January 1, 2015. The draft legislation will be shared with members for feedback.
BHTA and its industry partners had sought a VAT rate much lower than the 15% originally proposed to minimize the impact on pricing, arguing that higher prices would reduce the market share which The Bahamas could draw from. Independent research which the industry commissioned with Ernst and Young showed that a 7.5% VAT would result in a 4.2% increase in pricing.
BHTA joined with the Chamber of Commerce’s Coalition for Responsible Taxation in recommending to Government a lower VAT rate combined with other revenue measures, increased compliance on taxes owned, greater fiscal discipline, and advancing energy reforms to reduce business costs. The organizations have also expressed a desire to work close with Government on business readiness during the transition to VAT.
The recommendations were based upon the Coalition’s research conducted by Oxford Economics, which BHTA supported, and our tourism industry research.
These points were shared in a meeting earlier this week with the Prime Minister where BHTA also expressed concerns about VAT being imposed on matters like Promotion Board levies, gross overseas sales, mandatory gratuities and fees, and complimentary rooms. The groups also called for the passage of Gaming reforms and the regularization of the webshop’s numbers business, as key measures which would generate additional revenue for the Government.
Both the Coalition and BHTA also called for a rollback of the business license fees to the pre-July 1, 2013 levels.
Over the coming days BHTA will review the details of the Prime Minister’s budget communication and the draft legislation once it is released. We’ve welcomed the cooperative undertaking with all public and private sector stakeholders and look forward to continuing to work with Government on resolving those matters which impact our price competitiveness.
BHTA’s industry partners in the review process over recent months have included the Nassau Paradise Island Promotion Board, the Grand Bahama Island Tourism Board, the Bahamas Out Islands Promotion Board, the Bahamas Hotel Employers Association, the Marina Operators of The Bahamas, the Bahamas Sightseeing & Tour Operators Association, and the Bahamas Diving Association. Atlantis, Baha Mar, Sandals and Breezes have also provided direct support.
In the Prime Minister’s attached budget communication, most VAT matters are addressed starting on page 74.
Other Key Points in Budget Communication
The budget communication provides an overview of various tourism-related investment and infrastructure projects throughout the country. It speaks to the Government’s intention to eliminate customs processing and attendance fees for commercial airlines which generate volume business to The Bahamas. In exchange, the departure tax will increase from $25/head to $29/head effective Oct 1, 2014.
The Prime Minister said he intends to bring the Gaming Bill and the regularization and licensing of webshops to a conclusion shortly after the budget is passed.
The communication also included a commitment to extend the Downtown Nassau Revitalization Act and the Family Island Encouragement Act for another year.
View Budget Communication