“I am pleading with the Minister of Finance to reconsider lowering the rate of VAT on car rental for at least our overseas visitors. Car rental is a critical component part of our export tourism offerings.”
Hired cars unreasonably expensive in Barbados
Whether travelling on business or pleasure, I usually hire a car, because for me it adds a huge extra dimension to the experience and dramatically increases the options available.
With an imminent budget on the horizon, I would implore the Minister of Finance to look again at our car rental sector, if we are going to maintain the recent increase in visitor arrival numbers.
Personally I do not think this segment of our tourism offerings gets the attention it deserves and that is probably partially due to the lack of knowledge and understanding of the enormous contribution it makes.
Just one of our larger vehicle rental operators has a fleet of almost 130 cars. If you average a rental period at 7 days, with a driver and at least one passenger, that amounts to over 13,000 persons each year. Of course the fleet size varies enormously, but from recently writing to over 30 Barbados based entities offering car rental, it gives you some idea of the importance in economic terms they play overall.
Rarely do I pay more than US$150 for a week’s rental in North America or GB Pounds 100 in the United Kingdom for a compact car, so for many of our visitors it can be quite a shock to pay what are considered ‘normal’ rates on Barbados. But it’s easy to see why, because of the taxes on purchasing cars here is staggeringly different to those where our major source markets emanate from.
Also surprising is the sad and difficult to understand logic behind the decision not to lower the rate of value-added-tax (VAT) on vehicle rental when the adjustments were recently made to hotels and some restaurants.
Perhaps it is because our tourism planners and policy makers do not fully understand the secondary benefits and economic importance that the flexibility of having a rental vehicle brings. It enables our visitors to sample more restaurants for lunch and dinner, patronise our attractions, activities, increases shopping options and generates fuel purchases among others.
All of which put additional non-refundable VAT and other taxes into Government coffers.
So on their behalf, I am pleading with the Minister of Finance to again re-consider lowering the rate of VAT on car rental for at least our overseas visitors and treat it like it is, a critical component part of our export tourism offerings.
Any administration must eventually understand that there are only so many ways you can collect taxes, before there is resistance and the level of taxation becomes a direct deterrent.
The question also has to be asked is, that if car rental was more affordable would more people hire vehicles? It would appear so, if we apply the same scenario to other component parts of tourism, like hotels, air travel, reductions in dining costs etc., so could it not work for car rental?
Thirdly if more visitors hire vehicles would there be a greater overall spend across all sectors of the industry?
Finally, would Government benefit overall with the collection of duties and taxes collected on additional fleet vehicles being purchased, fuel consumed, driver permits, increased employment, repairs and servicing etc?
I think the answer to all these would be a resounding YES!
Photo courtesy of Coconut Car Rentals