Bahamas News

On the heels of a Caribbean centered study on taxation and tourism costs in the region, the President of the Bahamas Hotel Association Russell Miller has acknowledged that the current customs duty based taxation regime adds to the already high cost of operating a hotel property in The Bahamas.

Mr. Miller said without the concessions offered under the Hotels Encourage Act – which clearly recognizes the high cost of building and refurbishing a hotel in The Bahamas and reduces the tax burden on investments – tourism, as we know it, would simply not exist.

“To remain in the hotel business in The Bahamas today does present some challenges. The high cost of doing business often erodes or eliminates reasonable profit margins,” he told the Bahama Journal in an interview from Abaco.

“We fight to contain costs, so as not to become uncompetitive, but it is an ongoing challenge,” Mr. Miller said. “Our customs duty based taxation system adds to the high costs of food for the visitor which is the single largest complaint we face.”

The three biggest factors to high costs are labour, utilities and the combined taxes, according to the BHA head.

Mr. Miller zeroed in on the Bahamas Investment Incentive Policy as a means of providing critical assistance in balancing the level of taxation with profitability in the hotel sector.

Although the BHA, he said, has not made representation to the government on this specific matter, from time to time it has addressed taxation on duty matters related to specific areas like encouraging duty exemptions for equipment and supplies.

Many countries in the Caribbean region have fiscal incentives for the establishment of hotels, which include exemption of corporate taxes, reduction of exemption from import duties on equipment and reduction or exemption of duties on construction materials.

However the reduction in duties applies specifically to the construction phase and incentives often run between five to 15 years depending on the number of rooms that the hotel is constructing.

In the study conducted by the Caribbean Regional Sustainable Tourism Development Programme, researchers said there is an urgent need for CARIFORUM governments to have a harmonized approach to concessions for hotel investments and to allow some incentives for those properties that are constantly upgrading their product.

President of the Caribbean Hotel Association Peter Odle said on the one hand government traditionally address the burden of high expenditure by applying taxation to leading sectors in the economy – more often than not, the tourism sector.

“By the same token, such an unfriendly fiscal climate makes our destinations less attractive as an investment opportunity and less attractive to visitors which produced the exact opposite of the intended result of taxation in the first place,” he said.

“It begs the question: Do these incentives, as they are, achieve their goals?”

The research identified three critical obstacles for hotels – small and large – electricity costs, taxation and government bureaucracy.

Officials explained that the cost of electricity, the impact of direct and indirect taxation and cost of labour would contribute to the pricing structure of the hotel room.

If these costs are too high, it was explained, hotels would run the risk of pricing themselves out of the destinations’ target market.

Mr. Miller made it clear that while several countries were targeted for the study’s fieldwork, The Bahamas was not one of them.

“Some of the issues addressed in the study by other nations do not have relevance here like the need for concessions for property upgrades and the short length of time for concessions. The study points to the need for countries to view tourism as an export sector and accordingly minimize taxation costs so as to encourage more economic activity,” he said.

“It also recommends that concessions should apply to hotels that invest in improving technology which improves efficiency, environmental management and training materials, all of which we agree with.”

Source: Bahama Journal