BRIDGETOWN, Barbados, Monday November 28, 2016 – Former Prime Minister Owen Arthur is contending that tax concessions granted to the Caribbean hotel chain Sandals are hurting the island’s finances, already reeling from a decline in revenue from the offshore financial services sector.
Presenting a lecture recently, he said an already eroding tax base occasioned by changes to the second largest revenue earner – the offshore sector – was made worse by the concessions, not only to Sandals, but to the entire tourism sector, the island’s primary money earner.
“The Government of Barbados . . . has set an extraordinary precedent by extending complete duty and tax free status to Sandals for 40 years, with the intention of making such a status available to other enterprises in our main sector – tourism,” Arthur said.
Sandals, which began operations in Barbados in 2013 at the former Almond Casuarina hotel in Dover, Christ Church, has been granted a 25-year tax holiday that includes a waiver on all import duties, taxes, imposts and levies on capital goods such as building materials, as well as food, alcohol and beverages. The waiver also extends to duties on the importation of motor vehicles and personal and household effects for senior hotel staff and non-Barbadian workers. At the end of the 25-year tax holiday the rate on concessions will be cut by 50 per cent for an additional 15 years.
Faced with mounting pressure from the accommodation sector for a similar deal, Government eventually announced that the hotel sector would be eligible for similar concessions.
Arthur said the loss of revenue as a result of these concessions had come after Barbados’ main financial trading partner, Canada, had drastically reduced the island’s once lucrative offshore business.
He explained that Barbados had been attractive to Canadian companies because this island was the only Caribbean territory with a tax information exchange agreement with Ottawa.
This advantage ended in 2007, he said, and Canada has since entered similar agreements with other countries and had been extending to them other tax deals that were beneficial to offshore companies.
“In consequence, international business and financial services have migrated from Barbados, leading to a decline in revenues directly generated by the sector from $356 million in 2007 to $97 million in 2013,” Arthur said.
He said Barbados’ other major trading partners had also been making changes to their regulatory regimes that will adversely affect the operations of international business and financial entities based here.
Arthur said the declining offshore revenue combined with the tourism tax giveaways, “signify that the Government of Barbados will continue to experience significant difficulty in raising the revenue to finance the plethora of public services that has been put in place since Independence”.
He said at its peak the international business and financial services sector produced 34 per cent of Government’s revenue, reaching an estimated total of $356 million. (Barbados Today)