With Government desperately seeking to raise revenue, President of the Barbados Renewable Energy Association (BREA) Aidan Rogers is suggesting that the hotel sector be made to pay a higher rate of Value Added Tax (VAT).
Rogers mooted the idea today while contending that the sector was responsible for about out 15 per cent of total electricity costs.
“You can ask the hotel sector to pay a bit more in the VAT rate. I am no economist, but I put that issue on the table because we are in a crisis and we need to be brutally honest with the circumstances. All of us have been asked to sacrifice,” Rogers said during a BREA meeting at United Nations House on Friday, called to discuss the state of the renewable energy sector, including financing in times of crisis.
Rogers said while it was no secret that the hotel sector has been paying less than half of the effective VAT rate of 17.5 per cent for at least four years, this was a luxury the island could no longer afford.
“We are in a fiscal crisis. As recently as the interim draft of the National Sustainable Energy Policy, the consultants tasked with preparing that draft identified that the Barbadian hotel sector, which is just in excess of 100 hotels, . . . accounts for 15 per cent of the island’s national electricity consumption. I stand to be corrected,” Rogers said, adding that “if you had to look at the aggregate percentage of our fuel import bill for electricity generation and what that translates to, I am sure that even with low oil prices now, it probably would be in excess of $10 million or $15 million”.
His comments came in light of the 500 per cent increase in the National Social Responsibility Levy (NSRL) from two to ten per cent, a tax that from which the renewable energy sector is currently seeking exemption.
The VAT rate for the tourism sector was lowered to 7.5 per cent in October 2013 at an estimated cost to the Treasury of $9 million annually.
Immediately following the May 30 Budget presentation, Chairperson of the Barbados Hotel and Tourism Association Roseanne Myers had expressed joy that Minister of Finance Chris Sinckler had not raised VAT on the sector, which is also exempted from the NSRL in keeping with the Tourism Development Act.
Though making it clear he was not picking on the hotel sector and that there were no quick fixes to the fiscal crisis facing Barbados, Rogers said hoteliers could play a greater role in ensuring energy efficiency since that remained one of the “lowest hanging fruits”.
“The reason energy efficiency is seen as the lowest hanging fruit is because one of the fortunate sectors in this economy, which has received from inception, an exemption from the National Social Responsibility Levy, is the tourism sector. That very sector can significantly improve their energy efficiency and their energy consumption by investing in some of the very energy efficient technologies that will now be affected – lighting, air conditioning, and solar water heating for hot water that they require,” he said.
“So these are some of the issues that we have when you look at the expanse of some of the implications for this renewable energy sector from the recent budgetary proposals,” insisted Rogers, while making it clear that BREA was not asking for incentives or handouts.
The renewable energy enthusiast pointed to a 2011 study of the tourism sector, which showed that about 60 per cent of its energy costs were for electricity and air conditioning.
Rogers said while some hoteliers had since attempted to incorporate more energy efficient methods in their operations, by and large a lot of the results from the study had not been acted upon, including a recommendation of a US$20 million investment in renewable forms of energy and energy efficiency that by now would have been saving the country foreign exchange on fuel imports.
Charging that Government earns close to 20 per cent of its revenue from the fossil fuel sector, Rogers suggested this may have put the authorities in a “catch-22” situation, and could also explain a perceived “sense of fear or trepidation to push aggressively towards the integration of renewable and sustainable energy technologies”.
The BREA president said Government’s focus on raising revenue from taxes on fuels to help with social services, was “one of the biggest barriers to significant progress in terms of advancing the renewable energy sector”.