Increased taxes and costs are killing tourism. Barbados government actions “simply defies rationale”

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Adrian Loveridge - tourism expert, hotel owner

Adrian Loveridge – tourism expert, hotel owner

I had hoped to dedicate this week’s column to the new measures put in place announced in the 2015 budget to stimulate spending, especially in the tourism sector.

Unless I missed something while trawling through the 57 pages, not a single ‘incentive’ has been announced that would be likely to encourage increased domestic spending across the sector.

Conversely, many could fairly claim that the additional $200 million in taxation annually will further restrain people’s ability to take a ‘staycation’ or enjoy one of many excellent restaurants.

Government Broke: VAT refunds two years past due.

In fact private sector led initiatives like the re-DISCOVER dining promotion have been forced to scale down any paid promotion, due to the continued inability to reclaim due and payable VAT refunds, now overdue for more than two years. This in itself is ludicrous and short sighted as many of the participating restaurants do not qualify and are unable to apply the reduced rate of 7.5 per cent VAT, but obligated to pay the higher 17.5 per cent rate.

So Government could be easily losing up to $2 million a year in lost taxes. Add the duties and taxes lost in the included wine element and that figure could well be significantly more, let alone the employment this promotion generates.

Until we witness some real actual sustained recovery in tourism, it is very difficult to comprehend why any Government thinks that increasing taxation and operating costs will reduce the time it takes to attain that objective. 

A very simple example is the recent reduction in Advanced Passenger Duty (APD) and elimination altogether for children under 12. As a result, at least one British tour operator is reporting a 25 per cent increase in long haul holiday bookings.

If this ‘advantage’ is going to be negated by higher operational and food costs caused as a direct result of increased taxation, then we will simply spin-in-mud and any early year gains in arrival numbers will be lost later in the year.

And while most reasonable people can see the logic of revisiting the VAT free ‘basket of goods’ the inevitable result will be to pass any price hikes onto the consumer and in this particular case, our visitors. Thus compounding the perception ‘we’ have as being an expensive destination.

The tangible consequence will be to push even more people considering choosing Barbados as a holiday to other places that truly offer better value-for-money.

So every accommodation provider, apart from one, who offers a food option, will have no alternative but to revisit their costing structure and inevitably push prices up even further.

The current administration also does not seem to have learnt anything from past mistakes. Raise land taxes in a recession by 50 per cent and now increase them again when there is a glimmer of hope with a possible tourism recovery.

Whatever your politics are, this simply defies rationale and makes absolutely no economic sense.

5 Comments

Filed under Barbados, Barbados Tourism, Economy

5 responses to “Increased taxes and costs are killing tourism. Barbados government actions “simply defies rationale”

  1. Third World Child

    Adrian, the government has no choice but to tax the industry to death. They saved nothing for a rainy day and it has been raining for some time.

    This place is finished. My sons are off to the UK and Canada. Nothing remains here for the future.

  2. Wily Coyote

    @Third World Child

    Suggestion “Name Change” TURD WORLD CHILD

  3. D Oracle.

    Yup, my kids are off to Canada….we down the tilit and I barely sticking around and staying out uvvit.

  4. D Oracle.

    Anyway, using “rationale” in a sentence including the Government is an irrational act.

  5. I’m slightly confused. If anyone could explain how this argument can be defended when trying to integrate it with the fundamental economical principle of supply and demand? As the demand for goods increases (more tourists = more demand), if the supply remains constant the price of the goods would have to increase regardless. So the growth of the tourism sector would cause an increase in the price of goods for Bajans anyway.