By Xian Smith
Nassau Guardian Business Reporter
NASSAU, Bahamas — Tourism Minister Dionisio D’Aguilar said the Bahamas government might move to strike a deal to authorize online hospitality service Airbnb to collect value-added tax (VAT) on its behalf for vacation rental homes.
Speaking with Guardian Business, D’Aguilar said the government is “anxious” to collect and tap every possible revenue source it can. He explained that since VAT is a consumer tax, it would not be a cost to the lessor.
“I don’t think anybody should in any way be worried about it because this is the trend,” he said.
“This is what every other jurisdiction is doing and the government should seek to collect this revenue in order to maintain the tourist product that those people that have their homes on Airbnb are selling,” he said.
On Monday, the US Virgin Islands announced an agreement under which Airbnb will pay the territory’s 12.5 percent hotel room occupancy tax on behalf of the service’s hosts for collection by the Virgin Islands’ Bureau of Internal Revenue (BIR).
“We will probably move to strike a similar agreement that the USVirgin Islands struck with Airbnb – that they collect taxes on their behalf if you want to rent your house in The Bahamas,” he said.
“For people who come to our shores, there should be an inherent desire to contribute to the upkeep of the country.
“It costs money to run this country.”
There are currently 908 active Airbnb rentals in The Bahamas, with an occupancy rate of 17 percent.
However, the government to date does not receive revenue from these rentals.
“Currently, if you stay in a hotel room and you pay VAT on your room the government gets money, but if you stay at an Airbnb and the person that is renting a house, it doesn’t charge you VAT, the government doesn’t get that money,” said D’Aguilar.
“There is an argument that those who rent their homes don’t make in excess of the 100,000 threshold and therefore, are not really required to pay VAT.
“But my response to them is, first and foremost, you can’t bring foreign guests to our shores and not expect to contribute to the upkeep of the country. Therefore, you should pay VAT.
“VAT is not a tax on the provider of the service, but on the consumer of the service.
“If you rent your house as a business, VAT will not cost you anything because the VAT that you collect from your customers, you will deduct from that the VAT you pay to your suppliers and you will send the government the difference.”
D’Aguilar said the vacation rental industry would, to some extent, be regulated.
“To a certain degree, as this market proliferates there is a desire to license and regulate,” he said.
“If you are going to be in this market and offer a product and offer a business, you are subject to some type of regulation.
“But you don’t want to over-regulate it to where you hinder commerce.”
Economic impact versus tax loss
The tourism minister said the beauty of Airbnb is that its economic impact filters down to residents of The Bahamas and has a gross domestic product effect in locations where it would not necessarily have that effect.
He also stated that the focus should not be solely on lost tax revenue.
“We are not to get obsessed with the lost tax, while that is an issue we want to address, you have to balance that off with hopefully, the increased economic activity these places are having in areas where the money would not have necessarily filtered down to,” he said.
Republished with permission of the Nassau Guardian