The Tourism and Hospitality Association of Guyana (THAG) had recommended that Guyana’s tourism product be VAT zero-rated to assist with the development of the industry, saying that bookings for tour packages were made as long as a year ago and could not be now increased by 16%.
The THAG recommendation was not taken on board and association members may now have to absorb the cost of the VAT which now has to be charged.
“Local operators have to commit to guaranteed prices to these international operators and cannot increase them once agreed. This has caused many problems this year with the dramatic increases in interior travel costs due to skyrocketing gasoline prices. All operators have had to absorb these prices,” the recommendation had said.
THAG said that at a minimum it believes that VAT shouldn’t be applied to tourism services for at least a five-year period to give time for the many initiatives now being taken to market Guyana to take effect.
THAG said that it is aware that at least three operators are quoting for itineraries to Guyana for 2008. “If VAT is suddenly applied to these prices, the local operators will have to bear this increase as it cannot be passed on to the international wholesaler/operator,” THAG said. And the group stated that most tour operators have to deal with international operators who normally work up to two years in designing vacation itineraries, pricing and marketing.
The release said that given the fragile state of the industry, most if not all of the operators will not be able to do so and this could lead to Guyana being dropped from international trade as a destination.
“Currently we are facing this situation in relation to accommodation rates quoted for Cricket World Cup in 2007 well over a year ago which it would seem would now attract the 16% VAT,” THAG said. The release added that some hotels have already notified the international booking agent only to be told that it would be impossible to raise these prices by 16%.
THAG said that the Private Sector Commission (PSC) has shown in several publications that it believes the cost of living will increase with the introduction of VAT and that this will dramatically reduce the limited disposable income that is available for expenditure on local tourism. “If this is combined with the introduction of VAT on tourism services, THAG believes that the local market will disappear totally and by default many of the resorts [that] depend heavily on this market,” the release said.
“With the problems now being experienced by the sugar industry through the removal of preferential trade agreements and prices, THAG recognises the huge potential tourism has to becoming the main vehicle for development of the Guyanese economy. In many countries, tourism has proven to be one of the greatest tools used in the diversification of traditional eco-nomies into non-traditional areas and with aggressive retraining policies we are convinced that tourism can contribute to the reduction of unemployment levels and the alleviation of poverty in Guyana,” THAG said in its recommendation. According to figures that THAG provided, the normal VAT rate in Barbados is 15%, but special consideration has been given to accommodation providers where they only have to charge 7.5%.
The release said that in Trinidad the 10% accommodation tax was never replaced with the introduction of VAT but VAT is applied to all other hotel charges. “Local tour operators do not have to charge VAT on sales overseas and are allowed to claim the VAT back on their local inputs, i.e. they are zero-rated,” the release said.
In Jamaica, THAG said, the generalised VAT is 15% but the tourism sector only pays 5.9%. “While operators must charge 5.9% on their sales, they can reclaim the VAT at 15% charged by their suppliers. In the Bahamas VAT is 6% but for tourism it is only 2.4% during the high season and 1.8% in the low season.
THAG said that Dominica introduced VAT in March 2006 at a general rate of 15% but hotel accommodation was given special consideration with a rate of 10%.
THAG is recommending that tourism is zero-rated since international tourism is classified as an export industry. “While the market may come to Guyana to experience the product, it is an export in the truest sense of the word. Under the new VAT laws of Guyana all companies that export their goods are zero-rated in order to keep them competitive in the international market. By default, tourism should be classified (in) the same (way) as industries exporting physical good(s) from Guyana,” the release said.
An international tour operator that has been for a number of years sending visitors to Guyana, Bales Worldwide, said that it was very concerned about the possibility of a large VAT increase in Guyana and fear that it would have a serious impact on travel here. “Nowadays clients have a choice of visiting and we know from our years of experience, that if a destination becomes too expensive, clients will avoid travelling to that country. Following increases in cost for 2007, Guyana could well price itself out of the market and become completely unattractive to potential clients, if VAT increases prices,” Bales Worldwide said in a statement.
