Don’t raise airline departure taxes!
That is the stern warning to Government from hotelier Adrian Loveridge in response to a proposal to increase tourism taxes, put forward by the Foreign Exchange Working Group of the Social Partnership, which was mandated by Prime Minister Freundel Stuart to advise Government on measures to boost the dwindling foreign exchange reserves.
On the other hand, Loveridge said he had no difficulty with the recommendation by the same committee to increase the cruise head tax.
Concerned that the bread and butter tourism industry is not producing the required financial returns while the island’s stock of foreign reserves is fast declining, the Committee warned of the need for urgent corrective action to stem the downward trend, including hikes in cruise visitor head taxes and airport departure fees.
However, Loveridge, the owner of Peach and Quiet, told Barbados TODAY the exit tax of US$30 is high enough as it is, and any increase will hurt, not help, the country.
“Our departure tax is already one of the highest in the region, we already levy VAT [Value Added Tax] on air travel, so we are already an expensive destination to get to and leave from, so that certainly would not be on my list for sure,” he said.
However, he adopted a different position on the cruise tax, which stands at US$6, arguing that “cruise ship companies contribute very little in terms of land-based tourism to the economy”.
Loveridge’s stance was supported in part by one of the largest travel agencies here, Going Places Travel, which went one further by opposing any increase in tourism taxes.
“There is no room for tax increases on cruises or airport departures in Barbados. Travel is already taxed very heavily and we do not need to give tourists a reason to find another destination,” County Manager Alanna Gray told Barbados TODAY.
Meanwhile, Loveridge suggested that if Government wanted to increase the financial returns from tourism, it should consider lowering VAT on direct tourism services. He pointed to the case of Argentina, which recently adopted a similar move, and according to him, within a few months, that country recorded an increase in arrivals figures and overall spend.
“It would encourage more people to come to Barbados through lower taxes which would be offset with a higher net spend and hopefully, a higher average spend of each visitor that comes to our shores,” he said.
In response to the working group’s concerns that the tourism industry is not producing adequate financial returns, Loveridge said Government has only itself to blame.
“We’ve done this to ourselves, you see. We’ve allowed particular players in the field to come in, getting enormous tax concessions – 25 years without any tax . . . . We’ve allowed this to happen,” he said in a clear reference to the 25-year tax holiday given to Sandals International.
The concession includes a waiver on all import duties, taxes, impost and levies on capital goods such as building materials, as well as food, alcohol and beverages, and extends to duties on the importation of motor vehicles and personal and household effects for senior hotel staff and non-Barbadian workers.
When the 25-year tax holiday is ended, the rate on concessions to Sandals will be cut by 50 per cent for an additional 15 years.
“When my wife and I stayed at the Sandals property we asked for a VAT receipt and we were told that Sandals don’t pay any VAT because it’s a tax. And the money that we paid by credit card is collected offshore in Fort Lauderdale and doesn’t necessarily even come back to Barbados. So when you have a government saying the private sector tourism industry is keeping money offshore, they are the people that have made it possible,” Loveridge charged, adding that small hoteliers like himself collect the VAT locally.
He added that he would like to see the local tourism industry operated on a more level playing field, where all partners benefit from some level of concession, which he recommended was best done by reducing the VAT rate on all aspects of the sector.
“So car rentals, restaurants, tourism attractions and activities, people like Atlantis Submarine, and all the remaining accommodation providers pay the same rate of VAT, 7.5 per cent.
“I’d also like to see the enormous influx of unregistered accommodation also brought into the tax threshold. As the protocol director of Airbnb said recently, roughly 16,000 people booked accommodation through Airbnb on Barbados last year. I’d like to see all those accommodations providers paying VAT as well,” Loveridge said.