Prime Minister Mia Mottley has revealed that Government was in the process of establishing a special committee to review the types of concessions being given to the hotel sector.
While not giving full details, Mottley recalled the concessions granted to the Sandals group, pointing out that it was about time the tourism sector contribute more to the recovery of the island’s economy by paying its fair share of taxes.
Mottley made the comments while addressing the 2nd Annual Washington DC Panel Discussion Series hosted by the Boston University’s Global Development Policy Centre and United Nations Conference on Trade and Development (UNCTAD), which took place alongside the 2019 IMF/World Bank Spring Meetings this week.
The PM disclosed that a public/private sector committee was being established to consider what would be considered “fair, decent and reasonable deals” for hotels.
“Do hotels need 25-year tax exemptions in order to recover their capital in order to be able to function? I don’t think so, but they all think so. And if we say no and everyone else says yes what happens? So these are some of the issues that we have to confront,” said Mottley.
Pointing out that Barbados was in the process of coming out of a deep economic recession, Mottley said while some choices were very difficult for the country to make they had to be made.
She made specific reference to the range of taxes that had to be imposed on the bread and butter tourism industry, insisting that the burden had to be shared with both residents and visitors.
After a range of room rates were imposed on the sector last year, they were increased at the start of this month, while the Value Added Tax (VAT) is set to increase from 7.5 per cent to ten per cent come January 2020.
“We have shared the burden between domestic residents and tourists visiting because tourists in fact, constitute three times our population visiting on an annual basis and using our infrastructure in the same way that those who live there use it,” Mottley told the gathering.
In a clear reference to Sandals Resorts International, Mottley said she recalled that in her budget presentation last month that she had to remind “a large investor in the Caribbean that we don’t run a company, we run a country and we don’t have the ability to play fast and loose with the kind of egregious requests and that I consider the rule of law paramount because Barbados has one asset, its reputation.
“The last Government awarded tax incentives that were exceedingly egregious over a 25-year period, fully, and then another 15 years thereafter. They wanted even more on top of that. And I made the point that I will honour the agreements of the last Government because not to honour them would cause immeasurable consequences to our reputation and to honour them will cause a large measureable hit,” she added.
Mottley, who was responding to questions, also told the gathering that where Government could not continue to tax, it decided to use its “other powers” as part of the fiscal governance including changes in legislation and regulation, investment policies and through empowerment.
The Prime Minister said she believed the world was “in a very dangerous flirtation” with how it treats to tax and too many things, as she pointed to organisations accusing small states including Barbados of having very low corporation tax rates.
Mottley pointed out that there were a number of other jurisdictions that had lower or even zero tax rates including the US, while predicting that corporation taxes would become “a thing of the past” in the next 15 to 20 years.
“Yes, whether we like it or not, people are going to move more towards the taxation of assets and the taxation of transactions. So we have to start having some conversations that stop categorizing people and labelling people,” she said.