AIRbnb Rentals In BVI Raise Grave Concerns

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By Mellica McPherson-Ganda

On booking websites, such as expedia.com a two-bedroom villa in Cane Garden Bay Tortola was quoted at $240 per night; while a two-bedroom villa in Cane Garden Bay Tortola was quoted on Airbnb for $135 per night. This disparity of rates has been causing discomfort to hospitality industry stakeholders, and to BVI Leader and Minister for Tourism Dr. the Hon. D. Orlando Smith.

Airbnb was described by Wikipedia as “a peer-to-peer online marketplace and homestay network that enables people to list or rent short-term lodging in residential properties, with the cost of such accommodation set by the property owner.” However, in the House of Assembly on October 13 the website was mentioned as a facilitator of nonpayment of accommodation tax in the Territory, and a means by revenue is lost.

In pointing out the challenges posed by the online booking site BVI Premier Smith said: “There is something called Airbnb where you can book a room, or even one of your bedrooms and rent it to somebody on the internet; and the Government never hears about it.”

The loss of revenue by this means was described as troubling by Hon. Smith, although he announced that Airbnb is not the only means to avoid paying accommodation tax: “There are many other ways like that where people can avoid paying hotel accommodation tax. Even the visitors that are here in the BVI, it is possible that some of them are not paying hotel accommodation tax. This is something that we have to do something about.”

“This is one reason why we appointed junior ministers of government. We have a junior Minister of trade who is working assiduously on this problem along with others –working with Inland Revenue Department, working with the Trade Department, and the Labour Department to try to coordinate the activities to ensure that all of government’s revenues are collected efficiently,” he noted.

In stressing Government’s intent to collect revenues being skirted, BVI Premier Hon. Smith  added: “A very important point is about collecting the revenues owed, this is a very significant point especially as it relates to hotel accommodation tax…there are many reasons given why it is difficult to collect this money…We are really making strong efforts now to make sure that all the money that is being owed to Government is collected.”

 

Regional and International Airbnb Viewpoint

Airbnb has been reported by European media as hosting third parties renting non-existing properties: hundreds of such cases were recently reported in northern Italy. Additionally the Italian Federation of Hoteliers, Federalberghi has been reporting that Airbnb has been offering some 222,000 properties. According to the president of Federalberghi Bernabo Bocca, “undeclared tourism continues undisturbed its run, generating a lower social security and indiscriminate spread of  ‘tax evasion and undeclared work’ .”

“In Italy the Airbnb group has paid in 2015 only 44,500 euro of taxes, writes Il Sole 24 Ore on its ItalyEurope24. Airbnb Italy is the national subsidiary of Airbnb Holdings, which is headquartered in Delaware, tax haven in the United States. Founded in 2008 by Brian Chesky, Joe Gebbia and Nathan Blecharczyk, it offers accommodation in 34,000 cities and 191 countries and has been used by over 60 million tourists. The 2019 turnover projection by analysts is 1.6 billion dollars.

The rapid expansion of Airbnb services in the region has been described as disruptive to the tourism sector and was even discussed at the 14-16 September State of the Tourism Industry Conference (SOTIC) that was held in Barbados. The conference also featured Airbnb’s regional manager for the Caribbean Mikel Freemon as a panelist.

The regional concerns about sites like Airbnb is supported by the fact that the Caribbean Hotel & Tourism Association (CHTA) noted that by February 2016, Airbnb reported more than 25,000 listings in the Caribbean.

However, in a commentary Hugh Riley the Secretary General and Chief Executive Officer of the Caribbean Tourism Organization announced that the entire impact of websites such as Airbnb on traditional hotels is yet to be determined.

“Reports released in 2016 by Goldman Sachs and Smith Travel Research indicated mixed findings. STR suggests that there has been little impact, while the Goldman Sachs report reveals there has been a negative impact,” he added

 

International Concerns

The Iceland government in an attempt to remedy the Airbnb effects on its tourism sector passed a legislation that will take effect on 1 January, 2017 that is expected to keep Government in the loop of rentals and as a result eradicate tax evasion.

The legislation makes provision for Icelanders to rent property intended for personal use for up to 90 days or until two million Icelandic krona (about $17,000) in gross rental income is reached. However, the renters will be required to register with the police, pay a small fee, and provide an overview of their expected rental days and income. It was further announced that hosts who do not comply will receive warnings, then fines of an undisclosed amount.

However, it was reported that already means of circumventing that law have already been identified.

According to a recent Daily Mail (UK) article “Official bodies such as Abta have warned about the risk of fraud when using accommodation websites such as Airbnb. The methods of the scams vary, but include posting bogus adverts and hacking into accounts to intercept bookings – and they can be very convincing.”

According to The Guardian: “Airbnb faces accusations that it is leaving its users vulnerable to fraud after previously unseen figures revealed that a growing number of people have fallen victim to scammers while trying to book a break via the British arm of the holiday rental website.”

A BVI commentator said, “What if the same fraud starts to happen here, the BVI reputation as a fantastic destination would be soiled and we will all suffer for it; the government should impose a high taxation and measures to prevent fraud involving BVI rentals on internet platforms”.

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