BHTA: Governor’s Comments Shows Need For ‘Great Caution’ On VAT

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Concerns about value-added tax (VAT) expressed by Barbados Central Bank Governor Delisle Worrell underscore the importance of approaching VAT or any tax reform “with great caution and the value of broad public and private sector stakeholder collaboration and buy-in up-front,” according to the Bahamas Hotel and Tourism Association.

Commenting in the wake of statements from Worrell in an interview with Guardian Business in which he called VAT an “anti-tourism” tax because it reduces the sector’s competitiveness, BHTA President Stuart Bowe said that the BHTA has for its part made it clear that VAT as proposed would add to the already high cost of business and consequently would make The Bahamas less competitive as a tourist destination.

“We recognize the fiscal dilemma the country is facing and realize that additional revenue is needed to address the debt, but it cannot be done at the detriment of our industry and economy. We believe government shares our concerns and is receptive to considering the findings and recommendations from the research which is presently being

undertaken by the Coalition for Responsible Taxation and by our industry,” said Bowe.

In his comments to Guardian Business, Worrell suggested that a “simple sales tax” would be a more preferable way to raise revenue for the government in a tourism-based economy. He said he has been lobbying the government to get rid of VAT in Barbados.

Commenting on the possibility of a sales tax as opposed to VAT, Bowe said: “We are open to a number of options and will reach our final decision after a review of the findings from the economic modelling and competitive impact analysis which is being undertaken. The bottom line is tourism is the main driver of our economy and must be price competitive, or the entire country will be impacted.”

Barbados hotelier and owner of the Peach and Quiet Inn Adrian Loveridge, told Guardian Business that one of the major challenges for tourism in Barbados has been the slow refunding of VAT paid to government, for example, after hotels close for renovations in summer months, and the differential rate of VAT applied to different tourism services.

Bowe said that the BHTA had raised such concerns with the government early in its consultations and has been pleased to date that the government “has elected not to go the refund route”.

“A month-to-month reconciliation system is being considered, where a business adjusts what is owed against what is paid. Again, the final model for recommendation will be based on findings following our present consultations.”

Bowe said that the BHTA has conveyed to the government its views that tourism “must be considered differently, given its unique position in the Bahamian economy, as a number of jurisdictions with VAT have done”.

“Tourism is an export product whose earnings are dependent on global price competitiveness. If we are not sufficiently attractive from a price point to generate the business, we all lose as it has a corresponding impact on employment levels, the success of other businesses and government tax revenue. That’s why we say that ‘tourism is everybody’s business’,” said Bowe.

Alison Lowe
The Nassau Guardian
Published: February 27, 2014