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In case you haven’t heard, a minor storm is brewing in the Atlantic, off the coast of Florida, and it may have an impact on tourism this coming winter. This storm is not meteorological, however; it’s financial, and its epicenter is Nassau, where Bahamian legislators are contemplating the imposition of a Value Added Tax (VAT) of 7.5 percent this coming January 1. The tricky part of this tax is it may wind up being imposed on tourism products such as lodge visits and perhaps even on the commissions lodges pay overseas agents.
As bad as this sounds, it is actually much better than the original proposal, which would have seen the imposition of a whopping 15 percent VAT on all goods and services, including tourism products. That proposal was shot down when an Ernst and Young study commissioned by the Tribune, a Bahamas newspaper, estimated that a level of VAT that high would eliminate 9,000 Bahamian jobs and cause a $380 million drop in tourism sales in 2015.
Exactly what level of VAT will be imposed and what it will be imposed on, mind you, is far from certain at this point, but one in-the-know lodge owner we contacted believes there is a 90 percent chance the 7.5 percent VAT will become law in something like its current form. He is so confident of that he has already posted 2015 prices with the VAT cost included. Of course, he has told clients he will refund the VAT charges if the tax is not imposed.
The back-and-forth discussion of the tax has gotten heated in the Bahamas, so our contact did not want to be quoted by name. However, he did allow us to pass on his thoughts anonymously: “The press and accounting firms in this country, and even some business organizations appear to be confident that the VAT will be introduced, despite the bleating from many quarters. The fact is, something does have to be done to raise government revenues in the Bahamas, and a moderate VAT appears to be emerging as the consensus view on the way forward. If I were a betting man, I would say the chances of it not being imposed are less than 10 percent.”
We plan to follow the unfolding conflict over the tax in the coming months. In the meantime, be aware that it is indeed very much up in the air what the tax will be imposed on and whether it will replace (or augment) some current taxes, such as the current 10 percent hotel tax. It is also not clear that trips booked now, before the tax is imposed, will be exempt from the new VAT, so go ahead and rush to book your 2015 trips ahead of time in an attempt to avoid the levy, but don’t be surprised if you wind up paying it in the end. Stay tuned. . . .