Dear Editor,

Hotel Taxes

With the recent letter sent out to second homeowners on Eleuthera, an old debate has been given new life.

There are those who don’t want to “offend” the second homeowners who are seen to bring money to the islands in the form of tourism, but this hotel guest tax of 10% of the rental is paid by the renter which in turn is paid to the government of which 50% is returned to the local community. 

The amount of rooms now available for rent via the second homeowner market far exceeds the number of actual hotel rooms on the island and as such, those rooms should be seen as a “hotel” in itself.  In fact we have spoken with several local establishments who have confirmed that they are running extremely slow for the majority of the year.

These business owners are paying their fees and taxes.  They have noticed a dramatic decline in occupancy since the number of unlicensed rental homes has come on the market.  They cannot compete. 

For far too long, second homeowners have not been licensed and not paid hotel guest tax as required by law. Some of them have been told by website owners that they don’t have to pay it “because they will never get caught” or the “Bahamian government will never get it together enough to enforce the law”.  We also want to mention that a few homes do adhere to the law. As we are staring down the face of VAT, it is time to take control and enforce the laws that we already have.  Why are we going to be subjected to paying a 15% tax (VAT) when we allow homeowners to get away without paying their 10% rental tax?

We are leaving so much money on the table right now and it is time to wake up.  It is important for the community and it is the law.  We have heard for years at every local political event to expect a new hospital or better roads.  With the funds generated from these taxes alone we could not only fund these essentials but also improve our schools and community.  

Back to the topic of second home rentals a few non-Bahamians set up websites and convinced homeowners to list their properties on Eleuthera.  An owner may list their own home to rent or sell, but when a third non -Bahamian party is introduced as the owner representing these properties this becomes a legal issue of practicing real estate in The Bahamas.  When the 10% hotel tax is not collected this becomes a second legal issue.   According to a source, one site, is generating in excess of $300,000/month in rental income, netting its operator $30,000/in commissions per month.  The fine alone for the properties listed on one website amounts to 7.9 million dollars for just the year 2013.  These are funds that our community needs desperately.

There needs to be accountability both on the part of the government, the homeowners and the locals.  The time for throwing the ball or claiming ignorance of the law is over.  We have all been made aware.

The Hotels (Amendment) Act, 2009 introduced new licencing and taxation requirements for owner-occupied rental homes in The Bahamas.  An owner-occupied rental home is defined as property occupied by a person who being the owner in fee simple or a mortgagor in possession occupies and resides in such property exclusively as a dwelling house on a permanent or seasonal basis.

Effective 1st July, 2010, all homeowners renting one or more bedrooms in an owner-occupied home are required to apply to the Hotel Licensing Authority (a division of the Ministry of Tourism) for a Hotel Licence which must be renewed annually.  In addition, a rental tax at the rate of 10% of the rental income is payable on all owner-occupied homes which are rented.

The form is extremely simple to fill out and many people pay their hotel taxes in cash at the Administrators Office.  The more difficult part is getting licensed.  In order to be licensed the home will need to be inspected and many second homes that are in the rental pool may not pass that inspection.  Sure, the homes that rent out for 15,000/week will probably pass inspection, but those that rent for less might have deferred maintenance, which will preclude passing the inspection.  Does every room have a smoke detector, do you have fire extinguishers (inspected and tagged) by each stove, do you have a pest control contract, do you have reliable power and clean water, do your Air Conditioners work, do you have doors that lock and do you have either phone or internet that is on?  Those are just some of the things that homeowners will need to comply with to get licensed.   A renter’s first impression is of their accommodation.  Inspections will keep the rental homes to standard ensuring that our guests have a positive experience and further serve to promote our island.

The money collected from hotel guest taxes is shared between the local government and Nassau, 50/50.  The estimated amount of guest tax not collected from rentals since the beginning of 2013 is approximately $500,000.  Sure, it is probably a lot more, but do you think that our settlement could use $250,000? 
The claim that the online rental service providers have increased tourism to our island is false according to United Airlines,  American Airlines, Ministry of Tourism and Expedia.  The guests are simply being diverted from local hotels and inns to rental homes.

If you own a home and receive rental income, you need to be licensed and registered and you need to collect hotel guest tax, period.  If you have a child who is being educated in one of our schools, you are affected by the lack of money going back into our community.  If you are a non-Bahamian website owner, you are in violation of Bahamian law and you have misrepresented yourself to your clients.  Homeowners let’s make this a positive experience for everyone.  Rent your homes, pay the tax, help our communities flourish.

Sincerely,
Concerned Citizens