02062024 BUSINESS AND FEATURES

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business@tribunemedia.net

TUESDAY, FEBRUARY 6, 2024

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Private cruise islands set for VAT reform hit t $IBOHFT UP FOE 7"5 GSFF TUBUVT CZ .BSDI t "OE QVU #BIBNJBOT PO UBY MFWFM QMBZJOH mFME t $SVJTF JOEVTUSZ HJWFO UJMM 'FCSVBSZ UP SFQMZ

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Government is planning tax reforms that will hit the cruise lines’ Bahamian private islands and end their nine-year VAT-free status, it was confirmed yesterday. Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business that changes currently set to take effect from March 1 are designed to place the cruise lines’ private island activities on a taxation level playing field with Bahamian providers who service their guests at other destinations. He confirmed the authenticity of a Department of Inland Revenue “guidance document” obtained by this newspaper which

reveals that, within weeks, the tax authorities plan to change the tax treatment of goods and services supplied to millions of tourists who visit these locations annually by levying VAT on all such transactions at the standard 10 percent rate. Among the private islands that stand to be impacted by such a move are Royal Caribbean’s Perfect Day destination at Coco Cay in the Berry Islands, its global showpiece attraction; plus Mediterranean Shipping Company’s Ocean Cay location; Disney Cruise Line’s Castaway Cay and Lighthouse Point; and Holland America’s Half Moon Cay. Mr Wilson said the tax authorities have “no idea” how much revenue could be generated through the changed tax treatment,

IMF: Those with means pay more for health and water

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By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Government can slash “unproductive spending” by $116.5m and, in so doing, boost key public services if Bahamians with means pay more for water and access to public healthcare. The International Monetary Fund (IMF), in its just-released full Article IV report on The Bahamas, estimated that annual taxpayer subsidies to the Public Hospitals Authority (PHA) and Water & Sewerage Corporation can be cut by a sum equal to 0.8 percent of economic output by implementing

and imposition of VAT on all goods and services sold to cruise passengers, as they presently do not have SIMON WILSON access to commercial records showing how much economic activity is generated on these private islands. Explaining the rationale for the move, he told this newspaper: “When we implemented VAT originally we were under the impression given to us by the cruise lines that any commercial

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PRINCESS MARGARET HOSPITAL true “cost recovery” measures. In the PHA’s case, this would involve the imposition of fees for persons “with greatest capacity to pay” for use of the tertiary

care services offered by the Princess Margaret and Rand Memorial hospitals. As for the Water & Sewerage Corporation, the Fund recommended raising rates - which have not increased

since the 20th century for “heavy residential and commercial users”. These savings, the IMF suggested, could then be repurposed to finance education, social welfare and primary healthcare spending. It noted that the Government’s spending on education, as a percentage of gross domestic product (GDP), is well

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Minister set to intervene Energy, labour ‘bottlenecks’ on hotel industrial deal must go for GDP break-out By NEIL HARTNELL and YOURI KEMP Tribune Business Reporters

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

THE minister of labour will today meet with hotel union executives to discuss the latest counter-proposal from resort employees in a bid to break the stalemate over industrial agreement talks. Howard Thompson, the Government’s director of labour, told PIA GLOVER-ROLLE Tribune Business that the Bahamas Hotel and Restaurant Employers Association (BHREA) had lived up to its promise and yesterday provided officials with a new offer that will be presented to Bahamas Hotel, Catering and Allied Workers Union (BHCAWU) representatives today. Declining to provide details on the proposal, he said: “The Department of Labour and myself have received the counter-proposal from Atlantis and the hotel employers. It’s under seal, and myself and the mediation team would like for the minister to meet with the hotel union executives to discuss this further with them and that’s scheduled for tomorrow.” Mr Thompson declined to comment further, but it is thought that the minister’s intervention will seek to explain the background and context in which the hotels - Atlantis, the Ocean Club, Lyford Cay Club and Town Hotel - have come up with their latest offer and what the sector can bear financially.

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THE BAHAMAS must overcome labour and energy “bottlenecks” to break out of the lower 1.5-1.8 percent economic growth rates it is forecast to enjoy from 2025 onwards, the IMF is warning. The International Monetary Fund (IMF), in its just-released Article IV report on the Bahamian economy, said the Davis administration had admitted this nation needs to improve the supply and availability of skilled workers - and to further boost hotel room numbers - if this nation is to escape falling back into historical gross domestic product (GDP) growth rates. “Raising potential growth beyond 1.5 percent is conditional on addressing bottlenecks in the energy sector and labour markets,” the Fund urged, as it praised The Bahamas’ better-thanexpected recovery from the COVID-19 pandemic and the “favourable” economic outlook despite multiple “downside risks”. “Strong growth momentum is expected to continue,

with growth projected at 2.3 percent in 2024. Capacity limits in tourism will mean that growth will slow over the medium-term to its longrun potential of 1.5 percent,” it added, with GDP expansion slowly tapering off to 1.8 percent in 2025 and 1.6 percent in 2026. “The authorities remain optimistic about the medium-term outlook. With tourist arrivals back to pre-pandemic levels, the authorities acknowledge that boosting long-term growth beyond 1.5 percent will require investments in new hotel capacity, including in the Family Islands, where several projects are already underway. “Improving the domestic supply of skilled workers is also acknowledged as a means to reduce labour shortages in construction and tourism and amplify the economic impact of projects in these sectors. The authorities also concur that a slowdown in US growth, amid monetary tightening and global uncertainty, as well as the ever-present risk of natural disasters pose downside risks to the outlook.”

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activity on the private islands was an extension of the package purchased [by passengers] on ship - they were indistinguishable. That’s not the case. It’s a different commercial experience. “It has grown significantly. The private islands are much bigger, much more diverse in their operations, and they actually compete with Bahamas-based businesses for onshore excursions.” Asked how much extra revenue could be generated, Mr Wilson replied: “No idea. We have no idea. We don’t know right now. We don’t get any record as to what’s happening on the private islands. No commercial records.” The Government’s top financial official, though, said the move

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Opening Bahamian bank accounts ‘totally insane’ By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net A PROMINENT accountant yesterday blasted “it’s crazy, absolutely insane” that Bahamian businesses face an average wait of more than two months to open a bank account compared to “20 minutes” in the US. Philip Galanis, the HLB Galanis principal, told Tribune Business this nation must “find ways to remove impediments” to the ease of doing business with many of the obstacles “starting with the commercial banking system and ending there”. Speaking after the Central Bank of The Bahamas released results from a survey of 402 companies and entrepreneurs on the ease of opening a corporate bank account, he voiced “surprise” that 23 percent of respondents revealed they were able to open a facility in less than a week

PHILIP GALANIS given that it typically takes a month in his experience. Mr Galanis, who has frequently voiced concern at public forums about the difficulties the Bahamian private sector encounters in opening bank accounts, told this newspaper of a situation where a company that “does a tremendous amount of business in The Bahamas”, employing local staff and paying significant taxes, was forced to use a

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