As published on tribune242.com, Tuesday 14 December, 2021.
The Bahamas must reform its tax structure to become a competitive flag state for yachts, a marina operator urged yesterday, adding: “We cannot afford to rest on our laurels.”
Peter Maury, the Association of Bahamas Marinas (ABM) president, told Tribune Business that many of the vessels spending “most of their time in The Bahamas” are flagged in rival Caribbean territories such as Jamaica and the Cayman Islands because they are deterred from using this nation.
He explained that this was due to a taxation structure that levies “one-time” 10 percent duty, plus 12 percent VAT (soon to be 10 percent), on yachts and boats coming into The Bahamas to be registered. Few vessel owners, Mr Maury argued, wanted to pay an effective 22 percent tax rate that would see $2.2m levied on a $10m boat.
Asserting that this was money The Bahamas is not collecting anyway, the ABM principal instead argued that these taxes be eliminated in favour of, as an example, a $5,000 annual registration fee that would raise a collective $5m annually for the Public Treasury were 1,000 boats to be attracted to this nation’s flag.
Mr Maury said the fiscal and economic benefits from establishing a more appealing yacht registry would extend to company incorporations and fees, as most yacht owners create companies to hold their vessels as a means to limit liabilities, creating additional work streams for the likes of attorneys and accountants.
Bahamians, he added, could also start their own yacht charter broking businesses, while boat owners flying this country’s flag would be more likely to hire Bahamian crew and base their vessel in this nation, creating multiple economic spin-offs from the likes of fuel and grocery purchases, other needs and crew spending.
Speaking as Ryan Pinder, the attorney general, yesterday urged The Bahamas to “aggressively advance” the building of its yacht registry (see other article on Page 1B), Mr Maury signalled that the opportunity was there even though the industry was becoming more competitive with the likes of Bermuda, Panama, Costa Rica and even Guatemala seeking to make grand entrances.
The Bahamas must now fight harder to attract and retain the business, he added, even though there are more mega and super yachts on the oceans with international media reports disclosing a 25 percent year-over-year increase in new builds to around 1,200 in 2021.
Mr Maury said The Bahamas had already let one potential opportunity to cement its market position slip away when it failed to build on what he described as a 30 percent increase in boating traffic in 2017-2018, which resulted from many yachts substituting the Caribbean’s deeper waters for this nation as a result of tremendous hurricane damage inflicted further south during that period.
“At the time I was really saying to the Ministry of Tourism you’ve got to take advantage of this, get our electronic clearance processes sorted and our flag state sorted out, and educate Bahamians about the potential for cruising in The Bahamas,” Mr Maury said.
However, he argued that the ministry’s focus on hotels and cruise ships saw this chance “slip away”, until the COVID-19 pandemic and Hurricane Dorian struck and provided a second chance. The yacht/boating industry was among the first tourism sectors to open after the 2020 lockdown, and Mr Maury said: “That was the first time in 30 years the islands of The Bahamas had more yachts than the Caribbean.”
Pointing to “positive meetings” with Chester Cooper, deputy prime minister, and his tourism parliamentary secretary, John Pinder, the ABM president revealed they have discussed “easier entry protocols” for visiting yachts and boats plus “plus even a Bahamas flag for yachts coming on stream”.
“Jamaica has probably 1,500 boats under their flag, and Cayman probably more, but those boats spend most of their time in The Bahamas,” Mr Maury told Tribune Business, adding that a maritime committee of which he is part has been developing proposals for a Bahamian “yacht charter flag”.
“Under the previous government, I went to the minister of finance and tried to get them to lift the duty and VAT on yachts,” he added. “Can you imagine paying duty and VAT on an $80m yacht to flag it in The Bahamas? You can go and flag it in Jamaica. A yacht is different from a car. You can go to any ocean in the world.
“None of these Jamaican-flagged boats go to Jamaica. They collect the registrations and fee from yachts cruising in The Bahamas. My point is: Why not make it the same as everyone else? Make it zero. Boats will come into the country, and we will collect the fees. On top of that, every year the flag has to be paid.
“The goal of the ABM is to encourage those boats, if we can get the Government to change the flag, to not only register in The Bahamas but hire Bahamian crews and spend more money on fuel purchases and grocery stores. Each boat is an economy unto themselves.”
The Government previously eliminated 10 percent import duty on aircraft, which was seen as an obstacle to creating a fully-fledged private aircraft registry in The Bahamas. While some may see doing similar for a yachting registry as providing an unjustifiable tax break for wealthy owners who can afford to pay, Mr Maury said this represented money not being earned anyway.
Compared to The Bahamas’ effective one-time 22 percent rate, he added that the likes of Bermuda and Cayman are “at zero”. The Bermuda Tourism Authority last month made no secret of its intentions to attract more super yachts to the island, aided by tax concessions, while Mr Maury said it was also seeking out US marina developers to construct similar facilities in that territory.
Mr Maury said he is presently dealing with two 300-foot vessels moored at the John Alfred Dock in downtown Nassau, each with 28-strong crews that are waiting for the upcoming charter season to kick in.
Suggesting that yacht crews earn 28-30 percent more than their land-based counterparts, the ABM president added: “I don’t even have to prove it. The economics of this are apparent. I don’t have to guess about this. Look at what they’re doing in Antigua and the Caribbean. They’re trying to get all the yachts they can to come back to them.
“We cannot sit on what happened last year and think we’ve got nothing to worry about. It’s very competitive. Now Bermuda has opened up there’s competition on both sides. We cannot sit here and pretend they’re not going to go anywhere else.
“We have to be realistic about this. The field just got larger. There’s more yachts, but even Panama, Costa Rica and Guatemala have opened up to charters. They’re all coming on stream and saying: ‘Come stay with us’,” Mr Maury continued.
“For The Bahamas, our only competitor for the last 30 years has been the Caribbean, but The Bahamas and the Caribbean cannot rest on our laurels and think we’re competing against just each other as our neighbours around us want that business. The fact they are building more boats does not mean they will come to us.”
Mr Maury said real-time satellite imaging from Marine Traffic showed that Antigua and other southern Caribbean states currently have more yachting traffic than The Bahamas. “We’ve lost our edge compared to last year,” he added. “We have to get serious if we want to keep the business.”