Tax-reform proposals will 'knock us dead'

Janet Silvera, Senior Gleaner

WESTERN BUREAU:

President of the Jamaica Hotel and Tourist Association (JHTA), Evelyn Smith, has labelled the tax reform recommendations for tourism by the Private Sector Working Group (PSWG) as the "one-two punch".

"They want to knock us down until we are dead," Smith told The Gleaner.

Smith, in a press release last week, said her organisation accepts the need for reform of the country's system of taxation to ensure simplicity, equity and increased compliance and to stimulate economic growth.

However, the JHTA rejects the recommendations for an increase in the GCT rate on tourism services and for the removal of tourism industry incentives enshrined in law.

"The potential fallout from both of these proposals far outweighs any gains for tourism from other recommendations made by the PSWG," said Smith.

She argues that the removal of tourism industry investment incentives without the prior passage of such legislation will only result in the "rapid demise of our vital tourism industry and the further slowdown of local and foreign direct investment in tourism and our economy by extension".

Disturbing

The PSWG proposals are even more disturbing, she says when the following facts are taken into consideration:

a. Little or no growth in stopover arrivals - Jamaica is experiencing low growth stopover arrivals for the current winter season. This follows on a decline of 0.3 per cent for May-November 2011.

b. Vacations in Jamaica becoming more expensive from fees and taxes - Adding a 25 per cent increase in the GCT rate for tourism services after a 21 per cent increase in that rate less than two years ago, as well as the recent doubling of the Tourism Enhancement Fund fee on stopover arrivals only serve to make Jamaica even more expensive for visitors who have a wide choice of travel destinations.

c. Devaluation of the Jamaican dollar - During the last six months a trend towards the devaluation of the Jamaican dollar has become apparent with exchange rates now topping J$87 to US$1. As Jamaica's major foreign exchange earner our industry stands as Jamaica's first line of defence against precipitous declines in the value of our currency.

d. Vulnerability of tourism micro, small and medium enterprises (MSMEs) -The majority of entities in tourism are MSMEs and they are the most vulnerable. JTB statistics note that in 2010, hotels under 50 rooms had occupancy levels of only 27 per cent. An increase in GCT coupled with the withdrawal of incentives is a "one-two punch" that will knock out significant numbers of them.

e. Tourism depends on a stable social environment -The dramatic impact of levying GCT on many basic items can lead to declines in the standard of living of not just the most vulnerable but also many working Jamaicans such as the thousands of workers in our industry.

janet.silvera@gleanerjm.com