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BHTA RESPONSE TO THE 2017 FINANCIAL STATEMENT AND BUDGETARY PROPOSALS
Published on June 2, 2017

BHTA RESPONSE TO THE 2017 FINANCIAL STATEMENT AND BUDGETARY PROPOSALS

THOUGH there has been no increase in VAT for the tourism industry, Chairman of the Barbados Hotel and Tourism Association (BHTA), Roseanne Myers, states that the measures outlined in the 2017 Financial Statement and Budgetary Proposals will increase the cost of doing business for the tourism sector and in Barbados on a whole.

She stressed that the BHTA is appreciative of the attempt to protect the industry by not increasing the VAT rate of 7.5 percent and called it a welcomed initiative. However, she noted that there is still a need to fully implement the legislation promised three budgets ago for Direct Tourism Services (DTS) to benefit from the 7.5 percent VAT rate as well.

These new measures, effective from June and July of this year, which the BHTA Chairman says will also lead to a decline in competitiveness in the industry and affect its sustainability include:

  1. The National Social Responsibility Levy increasing from two (2) percent to 10 percent:
  • Clarification is being sought as the stated intent of the proposals was for tourism not to be impacted, but currently accommodation and DTS businesses are being charged the levy.
  • This will increase the cost of buying locally produced goods and imported goods significantly.
  • Only those properties approved for duty-free exemptions are exempt from this tax but it requires clarification as these same properties are still being charged the levy, and on very high ticket items. Additionally, the fact that the levy is not stated as a separate line item, on some local invoices, makes it difficult to track.
  • As the industry has still not received the full slate of promised concessions on food and beverage, and also for those other accommodation properties and DTS not granted duty free status, in addition to paying duty on goods, we must now  add the 10 percent NSRL and then the 17.5 percent VAT on top of that.
  1. Two (2) percent commission to be charged for foreign exchange purchases (wire, drafts, credit cards, counter sales):
  • This was introduce to deter from spending foreign exchange but for an industry that is not yet able to buy all inputs locally, it becomes a disincentive for doing business.
  • This will be another expense for all companies and will in turn increase not only the cost of goods but of services as well. 
  • Businesses that do not have foreign exchange accounts will also now have to incur the additional expense, in order to do business. 
  • Additionally, all capital works requiring imports will also see an increased costs
  • We have to consider the impact this will have on the transportation sector, including coach transfer and taxi rates.
  • While the price of diesel and gas remain depressed, perhaps the impact can be managed however, as it climbs, we will have to monitor closely.
  1. Increase in Excise tax on gas and diesel by 25 cents

Myers noted that the new measures to be implemented bring a level of uncertainty, “It leads to a number of question. What will the cumulative effect of the new taxes be on the sector? Will we see a contraction in spending? Will this budget stimulate economic activity in the tourism sector – the sector that is seeking to drive economic growth?  Will it increase foreign exchange earnings? Will these initiatives make the tourism sector more competitive in the short or medium term?

“With most contracts with tour operators for next year already completed, and rates already in the market, any cost increases will need to be absorbed by businesses already discounting in the summer to bolster occupancy.

“Uncertainty in our market continues, especially as we near UK elections, we have to ensure that while we share in the pain of what is being attempted in a single yea to close the deficit, does not hurt our chances at keeping the industry growing and producing hard currency.  The BHTA will need to embark on an analysis of the impacts, after clarification on some of the measures and a survey of its membership, as soon as possible.”

Myers added that the sale of Hilton will bring yet another level of uncertainty in the short term as there is no way of telling if after the sale, the property will remain under the Hilton brand. She said, “If the answer to this is a clear yes, then we need to ensure that we signal this very early to the travel trade and consumers, The sale should net foreign exchange which is greatly needed to pay foreign debt in the short term but in the longer term the proceeds will need to be repatriated if 100 percent is owned by non-Barbadians.

“We highly encourage the opportunity for purchase by investors including local entities in a transparent fashion, as has been indicated through open bids.  The banking sector assures us that borrowing foreign currency is possible. So carving out 10 to 30 percent ownership for smaller local investors could be very positive in the long run.

“Shares sold at a level that will allow industry workers to become shareholders in a post-independent Barbados would be progress, and signal the maturity and progressive thinking of the local tourism sector.”

Myers pointed out that there were some measures outlined in the proposals which may have a positive impact but stated that the Association need further details especially as it relates to the tax amnesty extension a VAT refund factoring programme

She said that the Association has been seeking a creative way to assist members in accessing VAT refunds and the opportunity to dialogue with the Barbados Revenue Authority, Central Bank and financial institutions, with an aim at being able to inject needed cash flow in an industry still struggling to be the engine of growth, was welcomed.

The BHTA Chairman also welcomed the promised comprehensive National Fiscal, Economic and Social Development Restructuring and Enhancement Programme to focus on setting out a clear and concise national plan, but stressed that it need to be rolled out quickly.

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