Tourism minister, Ian Douglas, has said while the government is willing to take a look at the Value Added Tax (VAT) for the tourism sector, it must be done prudently since the mechanism is the “backbone” of the Dominican economy.
“The VAT is the mechanism that generates revenue to government’s coffers, so that we can meet our commitments,” he told state-owned DBS Radio. “And we do not want to take any action on the one hand that will seem like a relief and concession but on the on the other hand will be depriving the government and stifling our lifeblood.”
At its general meeting held last week, the Dominica Hotel and Tourism Association (DHTA) said it had written to prime minister, Roosevelt Skerrit, concerning the reduction of the VAT on the tourism sector arguing this could 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.”
But Douglas said the government must be careful and prudent when examining the VAT mechanism.
“If we give one concession to one sector of the economy, then we open the floodgates and there is no telling where it will end,” he stated. “So we really have to do the analysis to really come to a conclusion that if we reduce the VAT for the private sector, especially the hotel sector, will that actually equate to more arrivals and more heads in beds and will that compensate for the loss of revenue for the government, will it generate more business in the economy and so government in turn will probably generate more revenue through other taxes rather than the VAT.”
He noted that the government is willing to listen to the DHTA and its partners but “we must weigh it and balance it.”
“We are also listening to the advice from the ministry of finance,” Douglas said. “We are not opposed to granting the concession and lowering the VAT but at the same time we have to be careful; we cannot be careless. We have to be prudent.”
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.