While applauding the government's decision not to charge value-added tax (VAT) on domestic travel, some carriers are still expressing concerns about other fees that have caused operational costs to go up significantly.
Pointing to the fact that domestic carriers contribute significantly to the economy, SkyBahamas' CEO Captain Randy Butler believes "it's a start in the right direction", but he still fears that if the government doesn't put a stop to other increases, then the domestic carriers could be "taxed out of business.
"Family Island resorts depend on domestic tourism. Allowing that tax increase would have driven costs up by 20 percent, which would make it prohibitive to travel to the Family Islands. So I am glad that the government is looking at these kinds of things, but they really need to figure out how to build this business," he told Guardian Business yesterday.
"Let's look at the customs and immigration fees that took effect last year, along with the departure tax. NAD (Nassau Airport Development Company ) fees continue to go up and you are going to get to a point where you tax domestic carriers out of business. So the government needs to pay attention to what is happening in the sector."
Western Air's Director of Operations Captain Wolfe Seyfert also welcomed the news, but is still seeking clarification from the government on whether other airport-related services will also be VAT exempted.
We just need to get a better picture of what we are going to be exposed to in terms of planning our strategy of how to get the airfares down, but not being exposed to any more cost increases. Obviously we are very pleased with the decision that has been made, but we would like to get clarification on the services that are provided at the airport, such as NAD airport fees, will that be exempted as well. As I understand the exemption on domestic travel would only apply to airfares and such," he explained.
Minister of State for Finance Michael Halkitis recently revealed that VAT will not be charged on any form of domestic travel, while speaking at the Progressive Liberal Party's (PLP) Killarney branch association meeting at the Casuarinas Hotel. At the time, he confirmed that travel by air, land and sea between islands will be totally exempt when the new tax regime comes into effect.
"The government has considered the domestic tourism market and understands how Bahamians love travelling to family islands," he said. The government plans to implement VAT on July 1, 2014 at a rate of 15 percent, with the hotel industry at a lower 10 percent rate.
Officials at the Ministry of Finance estimate that VAT can generate approximately $200 million in revenue in the first year alone, which the government has suggested is key to reducing national debt levels.

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