The Dominica Hotel and Tourism Association (DHTA) is calling for a reduction on the Value Added Tax (VAT) on the tourism sector arguing it could contribute more to the island’s economy.
The organization’s position was revealed at the DTHA’s 44th Annual General Meeting (AGM) on Wednesday evening.
“We are also looking at the interpretation and application of the VAT Act as it relates to certain membership concerns,” acting vice president, Renee Whitchurch-Aird Douglas, told the meeting. “We believe the reduction and review of the policy towards the the sector will create a competitive advantage for Dominica’s tourism stakeholders and contribute more to the island’s economy.”
The DHTA is proposing that VAT be reduced to 7.5 percent on accommodation, food and beverage and related tourism services “for all businesses in the tourism sector who depends 70 percent or more on the tourism for their business.”
“This will included hotels, tour operators, dive and whale watch operators, amongst other tourism related businesses,” Douglas noted.
She stated that prime minister, Roosevelt Skerrit, has received the DHTA’s proposal and the organization awaiting a response.
The VAT system came into effect on March 1, 2006. It is charged at the rate of 15 percent on goods and services. Accommodation in a hotel or similar establishment and dive activity is charged at the rate of 10 percent.
Meanwhile president of the AID Bank, Julius J. Corbett, told the AGM that tourism has contributed ‘very substantially’ to the island’s economy.
He said preliminary figures for 2010, 2011, 2012 show that the tourism sector contributed $252-million, $285-million and $205 million respectively to the economy
Can the request of the Dominica Hotel and Tourism Association (DHTA) made at its recent Annual General Meeting (AGM) for the Government of the Commonwealth of Dominica (GOCD) reduce the Value Added Tax (VAT) be considered “justifiable”?
The VAT currently paid on accommodation room rate is 10%, while the VAT on restaurant (food and beverage) and other ancillary services like sightseeing tours, diving, health and wellness, etc. is 15%.
The DHTA has requested the GOCD, by submission of a Position Paper, to reduce the VAT for all Tourism Sector services to 7.5%, thus making the Tourism Sector in Dominica more competitive to the regional competition.
While I support the DHTA’s request, a competitive Tourism Sector cannot be based on the reduction of the VAT only. The DHTA must recognize the importance of the delivery of excellent quality service of international standards at all times. They must also recognize the need for quality accommodation, and other visitor products and services that provides a semblance of uniqueness of charm and character, a modest state of hygiene and cleanliness, a safe and secure destination perception, and, an affordable and value-driven destination with adequate air and sea access, and other destination services, etc… without which the lowering of the VAT is not going to make much of a difference.
Recognizing that the Tourism Sector continues to be at an all-time low, and recognizing that less than half the visitors to Dominica stay in paid accommodation, I believe that it may be useful to reduce the VAT on Tourism Sector products and services thus enabling more visitors to have the option to stay in paid accommodation and to utilize the various other products and services offered by the sector.
I believe that we are all aware that the Tourism Sector, in general, is hurting from the lack of adequate and reliable air and sea lift, a generally undeveloped product, and, the general delivery of mediocre quality of service… but the high VAT rate imposed on the sector a few years ago has not done the Tourism Sector well either, and I therefore support the request by the DHTA to the GOCD to consider their request for a reduction of the VAT.
The only thing a VAT reduction would do for the tourism sector is to increase their profit margin. Nobody can tell me that they would pass the savings in VAT on to the consumer.
So, leave the VAT where it is unless it’s being reduced on other items/services as well.
What “profit margin” you talking about, defriend? Haven’t you heard the AID Bank and the State repeatedly threatened to shut down some hotels because of their inability to service their loans? The “profit margin” you speak about does not exist, Sir! Tourism does bring in a lot of money into the economy, but this does not filter down to the bank account of tourism businesses. Speak to the industry operators and they will tell you that most of what they make goes to pay their loans. They will also tell you that during the off-season (April to October), it’s hells for them.
You cannot overlook that the VAT is shrinking the operations of all major tourism service providers. Most tourists transact their business with credit and debit cards. A hotel may find itself waiting up to 90 days to receive their money after a tourist eats and sleeps at the hotel. However, the hotel has to find money to pay the VAT at the end of the month. You can’t tell the VAT Unit that you have not received your money from the tourist yet. So, you see, Sir, a hotel needs an overdraft facility in order to operate. If, God willing, the hotelier makes a surplus at the close of the year, that surplus is used up even before it is realised. So, wheel and come again.
Well there we go. All wanna be business men. Before I go into a new business venture I make sure that the figures stack up even during low season and budget accordingly.
Here business clearly is conducted differently, invest a few dollars of personal savings, go to the AID bank to finance the rest and hope for the best.
Business my friend is not for dreamers but for cool sharp calculating individuals without any sentiment for any particular venture.
The bottom line and to sum it up, if I can not make a hotel development in Dominica work and make a decent profit then dam well leave and do something else more worth while.
The tourism sector depends on improved infrastructure, (roads, sea port, airport, etc.), an educated workforce, fresh farm produce and other government services. All of these require continuous government expenditure. While we appreciate the efforts and hard work of hoteliers, they should be thankful that they are among the most fortunate in DA.
Paying only 10% is less than their fair share. Less fortunate folks pay 15%. Trickle down economics will only increase their profit margins, like the electric company, and will not necessarily increase tourism arrival. The government still has the awesome task to build and maintain an international airport.
Asking for a 7.5% reduction takes their 10% down to 2.5%!! Ah magwaysa! How do you propose that government pays teachers, firemen, nurses and the police you depend on for security? PM, that should be a simple no. If anything, everyone should pay 10% VAT.
Correction:
Due to a correction made by DNO to the original news report, my argument should read as follows, ” Asking for a 2.5% reduction in hotel accommodation, takes their 10% to 7.5%”. Note also that their goods and services will sill, in fact have a 7.5% reduction from 15% to 7.5% also. So 7.5 is correct in that regard but the story had a slight mix up.
DNO the article is erroneous on the main point.
The DHTA did not ask for a 7.5% reduction on the VAT. The DHTA submitted a proposal that the rate be reduced from 10%on accommodation and 15% on other services to 7.5% across the board ..
Still madness people, madness. The rest of Dominica is paying 15% even the poor on anything they buy, so why that special concession for hoteliers. I believe Government is already contributing quite a bit to the development of the hotel industry, as someone previously pointed out maintenance of roads, Destination marketing done by Discover Dominica etc. Come on, it is rough for mortgage payers, so we should ask for a reduction in the taxes we pay too to assist us in balancing our budget. Humm!!!!!
Have you ever seen a $50,000.00 light bill?
Or a 20% occupancy and still having to carry all your staff?
Non sense, reduce VAT at what cost!! Any sensible business person would know that VAT has helped to stabilize our economy. A reduction to DHTA membership or hoteliers would mean please less revenue for the treasury, how do they proposed the government make up for the reduction. We all know the economic situation that Dominica experienced before 2006. Suggestions and recommendations have to be balanced please people. When the hoteliers ask for a reduction it means it might be at the expense of Public Servants in this country, no salary increase, or maybe a salary cut. I am speaking from the stand point of having a good back ground in economics. The hotel industry has to take a pro-active approach to looking at ways and means to reduce cost of operations. I have not heard them talk about benefits of geothermal energy and how it is going to impact on their cost of operations. Let us say my boss is not giving me a salary increase because he cannot afford it, what do i do? I look at ways at which I can reduce my expenditure in other to balance my budget.
I strongly believe a reduction in VAT is a no no at this point in time. Look at St. Lucia what is happening, Grenada and Antigua. Are we going throw our economy in trouble for the sake of the opinion of the hoteliers. All sectors are struggling, Public Sector, Private Sector, public servants and it is not because of VAT it is the a global issue.
Red,
You say you hAVE A BACKGROUND IN ECONOMICS, but your submission says that you are either dishonest or you did not learn economics well. Simple; Government should not be the main employer, the private sector should be…less taxes means more producer and consumer income which would be diverted to greater consumption, greater consumption means more expenditure hence increase economic activity hence more revenue for government…..
PLEASE LISTEN TO THOMSON FONTAINE AND JOSHUA FRANCIS ON FOCUS ON THE ECONOMY EVERY WEDNSEDAY ON Q95.
TEAM DOMINICA HAS BEEN ON POIN RE THE ECONOMY. THEY HAVE ASKED FOR A REDUCTION NIN TAXES FOR MONTHS NOW….
That economic model has not worked in the United States. The rich got richer and the poor has seen a decrease in their purchasing power and reduced government services and mounting debt.
At least a sensible person has given the reason why government was able to stabilize its finances, VAT. Just an increase of taxes across the board.