BARBADOS - Passionate about tourism, Adrian Loveridge, a British expatriate living in Barbados and owner/operator of the Peach and Quiet Inn, views value-added tax (VAT) as "a fairly sensible way of collecting taxation".
He said the key for the tourism industry though are the rates applied and issues with the timeliness of government's refund mechanism.
During a question and answer session with the governor of the Central Bank of Barbados, Loveridge suggested that the government may need to keep a closer eye on how much of the VAT revenue on sales of vacations in Barbados made outside of the country by some of the larger hotels and resorts is being returned to the government's coffers.
Like quite a number of other Barbadian business people this newspaper spoke with last week, Loveridge said that getting VAT refunds from the government has been a problematic area, with some properties going as long as four years without receiving significant funds owed.
"The government has been very tardy," Loveridge stated.
This, he said, can often arise when hotel properties undergo renovations during the quiet summer months. He said some businesses expend major sums on upgrading their facilities, on which they pay out VAT, only to find that the VAT they collect on their sales over the coming months fails to match that paid out, leaving them in a deficit position which the government is not willing to refund them for.
In such cases, hoteliers have "got no revenue and the only other option is to go into overdraft to pay overdraft rates while government is owing you money, and that further compounds the problem," advised Loveridge in an interview.
However, Loveridge said he is not against VAT because it simplified matters. What he does care about is what rate it is charged at, and how well it is administered.
Barbados, a Caribbean island of around 285,000 people which depends primarily on tourism and international business and financial services for its economic wellbeing and which is struggling to turn around a burgeoning debt problem, has more than a few things in common with The Bahamas.
Loveridge started the Peach and Quiet Inn with his wife 25 years ago, and is now in his 15th year in tourism, having worked in 67 countries around the world as a tour operator, travel agent, tour director and hotelier.
"It's the only thing I know anything about," he quipped.
Commenting on VAT in the Barbadian tourism context, Loveridge said: "In the case of Barbados it replaced a whole pile of other taxes with one tax.
"But it has to be a sensible rate of VAT. I've seen VAT implemented in Europe, in the UK and in Barbados and to me it's actually a fairly sensible way of collecting taxation but it's the level of VAT that you do.
"Once you start going anything above 10 percent I think it's a huge deterrent. Tourism is a very competitive product, there are destinations coming out all the time and growing in importance, so you have to remain competitive.
"You can be a little bit more expensive but you have to give good service and value for money to allow people to come away and feel like they've got value for money, and it gets to a point where government imposes so many taxes that it ceases to exist because people look at the bill and say 'Well how on earth could it get to that kind of price'?"

Flat rate
One area in which Loveridge was adamant was the need to apply a flat rate of VAT across all tourism and tourism-related services. In The Bahamas, the government has proposed that a 10 percent VAT will be charged on all accommodation and room-related transactions, while a 15 percent rate would apply to other services such as tours, rental cars or even restaurants just outside of the main hotel property - such as in Atlantis' Marina Village; something hoteliers such as Atlantis President and Managing Director George Markantonis expressed opposition to.
"That's a huge mistake," Loveridge said. "Keep it at the same level for everything.
"But I think it's differential. Why should it be more expensive, tax wise, to eat a meal or rent a car than it is to stay in a hotel room?
"Keep it even and keep it at a rate where the government's got revenue to maintain infrastructure, the police force, etc, but keep it at a sensible level.
"What I would like to see in Barbados in terms of VAT is to treat tourism as an export and keep it at one level, so 7.5 percent for everything, whether you rent a car, go into a restaurant, stay at a hotel or villa, and the attractions and activities. Government needs the revenue but don't make it excessive; give us a competitive advantage over other places."
The government recently recognized this argument and during a year when Barbadian stopover tourist arrivals fell the most in the region - second only to The Bahamas - last year it announced it would adjust the rate back down from 8.75 percent to 7.5 percent, the rate first applied on the sector when VAT came into effect in 1997. And it said it would extend this rate to direct tourism services.
However, Loveridge said it later backtracked on that commitment when it determined it would be too costly to government revenue, and implemented a more conditional access to the rate for certain non-hotel related services, in which businesses must prove - among other things - that at least 75 percent of its revenue comes from foreign exchange.
The concessionary rate does not apply to standalone restaurants, activities or attractions, and for smaller properties it will be a major hurdle.
"It's a very complex procedure," he said.

Decline
Loveridge said he views VAT as at least "partially" responsible for a decline in the Barbadian tourism industry, which has seen 37 hotels close in the past 20 years; a figure he said is above any other Caribbean country. It has also been affected, like other countries in the region, by the implementation of the APD passenger tax by the British government, and substantial rises in utility costs.
In a recent interview with Guardian Business, Governor of the Central Bank of Barbados Delisle Worrell said he takes the "fairly radical stance" that despite its relative success as a revenue-raising measure, VAT is an "anti-tourism tax" that hurts tourism-based countries, is "horribly complicated" for both businesses and the government to administer, and it is for this reason that he thinks Barbados would be better off replacing it with a "simple sales tax".
Asked about Worrell's proposal, which the government is not officially said to be considering, Loveridge agreed: "Really I think it's a more logical thing to have (a sales tax).
"If it's at a certain level the average visitor is intelligent enough to know if it's below 10 percent, they can see we are getting a safe environment, the roads are being paved, they'll pay it because they are used to paying it in other places.
"If it goes above a sensible level they'll say well why should I pay it?"
His comments suggest that even after almost 17 years in existence, VAT is still a work in progress in Barbados, but also a policy measure that is not in itself considered to have been a nail in the coffin of the industry. However, recent adjustments to the policy indicate that managing VAT in a down economy, as The Bahamas will be doing, has proven more challenging than it has in the past.

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