When Government announced last year that it was passing a bill to allow the lowering of value added tax (VAT) to 7.5 per cent for qualifying hospitality partners, my initial thought was that it was a wonderful opportunity to at least partially address the frequently quoted high costs of our tourism product.
The criteria did not appear too ominous: that the entity had to be registered with, or has a licence from the Barbados Tourism Authority, Barbados Hotel & Tourism Association or Small Hotels of Barbados Inc, it was in compliance with all statutory obligations of the income tax, National Insurance And Social Securities Act and generates at least 75 per cent of total earnings annually in a foreign currency.
As, certainly in our 26 years’ experience, the vast majority of guests pay via credit card, I would not have thought this was difficult to verify.
 These imposed conditions would seem quite reasonable and, for most, attainable. Why then have so few seemingly eligible tourism partners registered successfully and applied the lower rate of VAT. After all, ten per cent of the final cost to the consumer is not an insubstantial reduction.
Looking at menus posted on the websites of many of our hotels with in-house restaurants or stand alone establishments 17.5 per cent VAT is still shown, which includes some of the big names and unless they have yet to be updated, state owned accommodation providers are included in this.
Interestingly, this applies even to businesses where their owners or managers sit on the board of the national marketing authority. So what has gone wrong? Is this once again a case of implementation deficit?
Originally the measure was announced in the 2013 Budget submission, so does it really take so long to process registration applications? Minister of Finance Chris Sinckler stated during that presentation that the concession would cost the Treasury $9 million annually across the entire sector, or roughly the same amount that Sandals Barbados would avoid in VAT payment for the same period when reopened.
You only have to go onto the Barbados Forum section of TripAdvisor to quickly gauge that price, or what is perceived by many of our visitors is less than value for money, is one, if not the most discussed topic.
As we enter the long eight-month softer summer season, the cost of our tourism offerings is going to become even more critical to final destination choice. Certainly the current high value of the Pound Sterling against the Barbados dollar, reaching within three cents of a four year high recently is helping make us more attractive to the Brits.
But this also applies to many other holiday offerings around the world. While welcome, the benefits from the amendment to the distance band of the advanced passenger duty will not have any meaningful effect until almost a year from now.
And this will be largely diminished during the next 12 months after British Airways decision to hike many Caribbean airfares by £10 (BDS$33) per ticket with immediate effect, with Virgin Atlantic expected to follow.
