What has gone wrong with the Barbados 7.5% VAT?

Current 17.5% VAT killing tourism

Adrian Loveridge - tourism expert, hotel owner

Adrian Loveridge – tourism expert, hotel owner

When Government announced last year that it was passing a bill to allow the lowering of Value Added Tax (VAT) to 7.5 per cent for qualifying hospitality partners my initial thought that it was a wonderful opportunity to at least partially address the frequently quoted high costs of our tourism product.

The criteria did not appear too ominous. That the entity had to be registered with or a license from the Barbados Tourism Authority, Barbados Hotel and Tourism Association or Small Hotels of Barbados Inc, it was in compliance with all statutory obligations of the Income Tax, NIS and Social Securities Act and was able to demonstrate to the satisfaction of the Comptroller and generates at least 75 per cent of total earnings annually in a foreign currency.

In our 26 year experience the vast majority of guests pay via credit card, I would not have thought this was difficult to verify. These imposed conditions would seem quite reasonable and for most attainable.

Why then have so few seemingly eligible tourism partners registered successfully and applied the lower rate of VAT? After all, 10 per cent of the final cost to the consumer is not an insubstantial reduction. Looking at menus posted on the websites of many of our hotels with in-house restaurants or stand alone establishments 17.5 per cent VAT is still shown, which includes some of the big names and (unless they have yet to be updated) state owned accommodation providers are included in this. Interestingly, this applies even to businesses where their owners or managers sit on the board of the national marketing authority.

So what has gone wrong? Is this once again a case of implementation deficit?

Originally the measure was announced in the 2013 budget submission, so does it really take so long to process registration applications?  

Minister of Finance Sinckler stated during that presentation, the concession would cost the Treasury $9 million annually across the entire sector, or roughly the same amount that Sandals Barbados would avoid in VAT payment for the same period when re-opened. You only have to go onto the Barbados Forum section of TripAdvisor to quickly gauge that price or what is perceived by many of our visitors, is less than value-for-money is one, if not the most discussed topic.

As we enter the long eight-month softer summer season, the cost of our tourism offerings is going to become even more critical to final destination choice. Certainly the current high value of Sterling against the Barbados Dollar, reaching within 3 cents of a four year high recently is helping make us more attractive to the ‘Brits’. But this also applies to many other holiday offerings around the world.

While welcome, the benefits from the amendment to the distance band of the APD (Advanced Passenger Duty) will not have any meaningful effect until almost a year from now. And this will be largely diminished during the next twelve months after British Airways decision to hike many Caribbean airfares by GBPounds 10 per ticket with immediate effect with Virgin Atlantic expected to follow.

3 Comments

Filed under Barbados, Barbados Tourism, Economy

3 responses to “What has gone wrong with the Barbados 7.5% VAT?

  1. Party Animal

    Come on Mr. Loveridge, do you really expect anything different from people who don’t know their head from their heals.

  2. PLANTATION DEEDS FROM 1926 TO 2014 , MASSIVE FRAUD ,LAND TAX BILLS AND NO DEEDS OF BARBADOS, BLPand DLP=Massive Fruad

    Lover @ You keep hoping and thinking that crooks liars and scumbags will keep their word good or bad, No matter where they go , the DBLP government is wrong , You seem to trust the DBLP and more so the BLP who may have let you get a ways with many things , Now different crooks are in Office you feel they to care one way or the other,
    Keep trusting crooks and will be fooled , The people of Barbados fight each day to pay 17.5% on all the things you want tourist to get free or at a reduce rate so you can fill hotel room . Tourist all ready get Duty free on most things they buy and the locals cant , The tourist money is worth more than BDS ,
    If for once you show you care about Bajans and work together with them , it will be a better fight.
    You open your business about the time Beatrice Henry died , check your deed and let us know if you have a clear title, Then move from there , cover your butt first before you try to fill your pockets ,

  3. Insane

    We have to ask our selves whether this is intentional on the part of the management of theses entities who are yet to show updated VAT rates on their offerings. It would be interesting to find out the rates being quoted on returns made to the VAT office. It is hard to believe that after lobbying so hard for this reduction that it has just slipped through the cracks. Could it be that the hotels are charging 17.5% VAT to customers and reporting only 7.5% on their VAT returns??? With the remaining 10% fattening the hotels coffers?