The convention tax incentive included in the Tax Information Exchange Agreement (TIEA) concluded between The Bahamas and the United States is expected to have a significant impact upon business levels in the vital tourism sector and could begin to manifest results within as little as six months, according to industry officials.
According to James Malcolm, Executive Director of Group Travel with the Ministry of Tourism, the incentive could generate a 15 to 20 percent increase annually in the convention or business meeting component of the hotel sector.
“That is a conservative estimate and I think as our capacity grows with more convention space on Paradise Island and Cable Beach and other places we’ll be able to tap into that even more deeply,” Mr. Malcolm said.
The convention tax provision of the TIEA came into effect on January 1, 2006 after the governments of The Bahamas and the United States signed the tax information exchange pact in January 2002.
Under Article 5 of the TIEA, US taxpayers are allowed to deduct from their income the costs incurred in connection with attendance at a conference or convention held in The Bahamas in the same manner that they would be able to if the convention or conference were held in the United States.
“Currently, US-based companies can go to San Diego, Orlando or Naples, etc. hold a convention or a conference, and the expense associated with that they can record as a cost of doing business on their annual income tax report,” explained Mr. Malcolm.
“Now they can come to The Bahamas and hold that same type of business group event and treat the expense on their income tax report the same way.”
Mr. Malcolm forecasted that while the benefits of the convention tax incentive will be most obvious at larger hotel properties, spin-off effects from the new arrangement would be experienced throughout the tourism industry.
Outlining the approach that tourism officials are taking in marketing The Bahamas to organisations planning business meetings, Mr. Malcolm said the Ministry is simply making the prospective clients aware of the convention tax incentive, but is not seeking to provide tax advice.
“What we are doing actively is we have a sales team of seven sales managers in our Bahamas tourist offices overseas in North America and they actively make sales calls and presentations, and arrange trade shows where they are talking to customers on the front line and communicating the provisions of the arrangement in very basic terms,” he pointed out.
“We’ve also done some targeted advertising already and we will be doing some more. We also want to do some advertising in the trade publications which the chief executive officers, chief financial officers, accountants and the tax lawyers read because my feeling is that’s where we are going to get the biggest attention.”
Also expressing high expectations for the convention tax incentive, Bahamas Hotel Association President Earle Bethell said the new arrangement should help to boost The Bahamas’ profile by making it a more attractive option for organisations planning business meetings.
“I anticipate that the incentive would have a meaningful effect on hotels in The Bahamas, the reason being that it now levels the playing field for us to go and compete against persons who have those tax incentives, for instance, the US Virgin Islands who we compete against and also destinations in the United States,” he said.
“That is so because the major companies will look at it as an incentive for them to venture this far since they will take into account all the dollars that they are going to have to spend on a vacation destination.”
According to Mr. Bethell, the convention tax incentive will likely help to not only improve the occupancy rate of hotels, but also allow properties to be more flexible about increasing room rates.
“Normally group bookings are year round so once you know what the base is, for example, if you know it’s a given weekend and everybody travels on that weekend, and you have a group base in there you then know that you can put your rates up higher because you already have 15 to 20 percent of your hotel sold out to groups,” he said.
By: Darrin Culmer, The Bahama Journal
