Government in the Bahamas urged to introduce vacation rental tax structure

Bahamas: A Family Island resort operator has urged the Bahamian government to ‘get a handle’ on the vacation rental industry and bring in a tax structure to collect the “millions” it is currently forfeiting.

Edwin Mulford, a long-time boutique resort operator on Cat Island, reiterated concerns that the government was missing out on significant tax revenues from vacation rentals, as payments to landlords are frequently made on an online platform outside The Bahamas.

Mulford said: “I think something needs to be done before it’s too late. If this isn’t handled properly, government is setting themselves up for a lot of headache. The problem is policing the situation.”

He added boutique operations were being increasingly impacted than larger hotels/resorts by Airbnb-type operations.

Mulford said: “The government must understand the significance of this. It is automatic revenue the government can get. This is worth a lot of money for government. We’re talking millions and millions of dollars where people are renting out their place online and the government never gets a dime.”

The Central Bank of The Bahamas’ monthly report for August revealed vacation rentals continued to grow in popularity among short-term visitors with average daily room rates (ADR) jumping by 1.8 per cent to $319.77. Airbnb bookings increased 41 per cent year-over-year during August.

The government said it was seeking to levy VAT on Airbnb-type vacation rentals, but minister of tourism Dionisio D’Aguilar said it had not yet developed “a working mechanism” for its collection.

Mulford suggested the government should consider an all-inclusive licencing fee based on the number of bedrooms per house, rather than introducing VAT on vacation rental businesses. He added the government could integrate a separate programme for Bahamians and their bed and breakfast offerings.

The Central Bank said in its report: “Indicative of the growing popularity of the short-term private rental market, data from AirDNA showed a 41.2 per cent increase in booked listings via the Airbnb platform during August for all Bahamas in comparison to the same period in 2017.

“These results are also influenced by the fact that more properties are listing on the site each year. In terms of the broad trends in the major markets, the number of listings in Exuma firmed by 54.7 per cent, while gains of 37.8 per cent, 34.8 per cent and 28 per cent were noted for New Providence, the Abacos and Grand Bahama, respectively.

“In terms of the key segments, the ADR for the entire place listings rose by 1.8 per cent to $319.77, while that of hotel comparable listings fell by 3.1 per cent to $132.19,” it added.

A report ordered by the Bahamas-based Organisation for Responsible Governance (ORG) had identified the vacation rental market as a potential opportunity for growth that could boost Bahamian ownership and entrepreneurship in the tourism industry.

The report, conducted by Oxford Economics, revealed the Bahamas’ route into the vacation rental market was being impeded by out-of-date, impractical laws and regulations. The study also said all vacation-based properties required approval by the Bahamas Investment Authority (BIA).

The Bahamas was reported to have 1,878 properties registered with Airbnb, of which 908 were deemed to be in active use.

The ORG report said ‘more relaxed investment requirements’ for vacation rental home developers could be restricted to specially-designated areas, such as Trade Development Zones (TDZs) near to ports and airports.