Second home rentals should pay tax
Published: Aug 31, 2013
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 is passed on to the guest, which is then passed on to our 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.
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.”
As we are staring down the face of VAT, it is time to take control and enforce the laws that we already have. 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.
Back to the topic of second home rentals, a few non-Bahamians set up websites and convinced homeowners to list their properties on Eleuthera. Although this is illegal, according to Bahamian law, these extremely successful operations have flourished because no local person has had the wherewithal to create a competitor and our government, whether by inattentiveness or by design, looked the other way.
According to several sources, one site is generating in excess of $300,000 [a] month in rental income, netting its operator $30,000 in commission per month. The fine alone for the properties listed on one website amounts to $7.9 million for just the year 2013.
There needs to be accountability both on the part of the government, the homeowners and the locals. The time for blaming others has to end. This is no one’s fault and everyone’s fault.
The law since 2009 states that any property that rents out one bedroom or more must be licensed and must pay hotel guest tax. This tax is 10 percent and is passed onto the guest and then forwarded to the government at the end of the month.
The form is extremely simple to fill out and many people pay their hotel taxes in cash at the administrator’s 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 will not pass that inspection.
Sure, the homes that rent out for $15,000 [a] 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? 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 and I venture to guess that many will not pass.
Having homes inspected will ensure that many of the guest complaints will cease because most of them have to do with cleanliness, lack of water, AC, power and lack of security. We have all heard about the filthy homes, robberies, lack of clean water and lack of guest services at rental homes. This is not just a problem of the homeowners and their renters, this problem affects all of us.
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 over $100,000. Sure, it is probably a lot more, but do you think that our settlement could use $50,000?
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.
Again, it is illegal for non-Bahamians to transact any real estate business, whether they are in the United States or any other country. The homeowners who list their properties for rent with anyone who is not Bahamian are breaking the law. Some of the website owners try to subvert the law by using a Bahamian shill and some don’t even do that, going so far as to boast that the Bahamian government will do nothing to stop them.
This is a problem for all of us. If you own a home and receive rental income, you need to be licensed and registered and you need to pay 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.
I have heard from many homeowners that they were told not to register and not to pay hotel guest tax because the government wouldn’t do anything about it. Whoever has said that should be ashamed and should be held accountable.
The hotel guest tax is just another piece of the puzzle. Are we going to protect and care for our country or are we going to rape her and destroy her for today’s gains?
If you are buying crawfish out of season, if you are doing shoddy work, if you are not caring for an animal, if you are charging someone too much, if you are being rude to tourists and if you are looking the other way while your neighbor takes a “payment”, you are part of the problem.
Are we a nation of talkers or doers? All of these things take care and action on our part. The problem is not only the homeowners, the problem is all of us for being too lazy to enforce the law and for allowing there to be a hole in the market that needs to be filled.
Any Bahamian could do the same thing that the website owners are doing, but will we do the work or will we sit back and blame others for our lack of prosperity?
— Concerned Citizens