Be done with special VAT rate for tourism – Arthur

If former Prime Minister Owen Arthur had his way the special 7.5 per cent Value Added Tax (VAT) rate, reserved for the hotel sector and other tourism related goods and services, would be scrapped.

He argued that the measure has left Government in a bind and that not only could the country not afford it, but that the reduction had in fact “perverted” the VAT.

Delivering his contribution to debate on the 2017/2018 Estimates of Revenue and Expenditure, Arthur, who repeated calls for the VAT to be lowered from 17.5 per cent to 16 per cent, complained that the tax had failed to yield the expected revenue because it had been undermined by exemptions and zero-related items.

“Every effort has been made to reduce the base of the VAT by having our VAT convoluted with a larger number of zero rated and exempt items . . . and therefore the base has been narrowed,” he said, explaining that the tax, which was introduced back in 1997 to replace 11 indirect taxes and 44 fees, was designed to cover consumption.

“The most recent study that I have seen from the IMF [International Monetary Fund] indicated that while initially the VAT was covering a 100 per cent of consumption, the VAT was only now covering 70 per cent of consumption.

“It has to be at some stage that the VAT has to be revisited in relation to its initial intent. Drop the rate from 17.5 to 16 per cent, remove most of the exemptions and zero rates,” Arthur suggested.

He said while tourism players were able to claim substantial sums against the 7.5 per cent VAT rate, the cash strapped country could no longer sustain the practice and it should therefore be phased out.

“The input tax is now 17.5 per cent and the output tax is 7.5 so there is a ten percentage point differential that is causing this massive build up in refunds that you cannot pay back and all I am telling the Government is that it should accept the advice and even if the tourism people may not be pleased, you have to remove such a wide differential and standardize the rate between the two over a period of time,” he urged.

7 Responses to Be done with special VAT rate for tourism – Arthur

  1. Angus Benn
    Angus Benn March 16, 2017 at 3:55 am

    Mr Arthur the prime minister is not listening to you.I think that you is wasting your time giving this government ideas. Mr Sinckler will like to take your advice., but his hands tied behind his back. The prime minister said that Barbados is in safe hands.or good hands what ever.

  2. Santini More
    Santini More March 16, 2017 at 7:29 am

    I can already hear the howl of outrage coming from local hoteliers.

  3. Richie B. March 16, 2017 at 7:40 am

    There seems to be no address to the excessive VAT applied to the mobile use. It seems almost illegal to have this discretionary tax which is burdensome at best. VAT should be one rate across the board.

  4. Baz Moz
    Baz Moz March 16, 2017 at 9:02 am

    And what you going to do about all the tax and duty free, concessions given to Sandals

  5. Rawle Spooner
    Rawle Spooner March 16, 2017 at 9:55 am

    Very damm good idea but this present day slimy government ain’t gine do that.

  6. Helicopter(8P) March 16, 2017 at 11:27 am

    Thank God there is no snow fall or monsoons to deal with! God is good! The one thing that no man or country can change, is the climate! Today’s economic madness all to the measures of capitalist appeal. We must find the wright formula

  7. jus me March 17, 2017 at 6:35 am

    Mr Affer
    Due respect, but you approaching things ass about backward.

    Barbados collects way enough revenue to pay what should be LEGALLY paid.

    Direct your attention PLEASE to the ROOT cause.

    THIEVES in common parlance.

    You can CHANGE, ALTER or do the FANDANGO.


    Therefore we in DEEP DOO DOO, forever.


    You were part of the system EVERSINCE.

    Don’t come at us with all your PSUEDO legalise, accountancy Jargon.

    Barbados suffering from a TERMINAL CASE of POLITICAL CONSTIPATION.

    We had the same SH**E ,since I can remember and it ent GOING NOWHERE.

    Just talk. Like yours.

    Meanwhile we all suffering, en seeing we country DISINTIGRATE.


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