Taxation and Operating Costs for the Caribbean Hotel Sector

276.6 Value Added TaxA Value Added Tax commonly referred to as VAT is a tax levied on goods or services as a percentage of theirvalue-added. The customer pays the VAT on purchases in addition to the normal price: the seller then pays thegovernment the VAT collected on sales. VAT is often applied at varied rates. In some cases VAT can be a formof sales tax such as in Jamaica and Barbados. A number of CARIFORUM countries notably: Barbados, Belize,Grenada and Trinidad and Tobago have introduced VAT.Table 4: Value Added Tax by CountryCountry Value Added Tax (%)Antigua and Barbuda 0%Bahamas 0%Barbados 15%BelizeGood & services: 9%; Fuel, alcohol and tobacco: 12%;Luxury Goods: 13%Dominica 5%Dominican Republic 16%Grenada Goods: 25%; Services: 5%Guyana Goods & Staples:10%; Foreign Luxury items: 25%HaitiData not FoundJamaica 15% 1St. Kitts and Nevis 0%St. Lucia 0%St. Vincent and the Grenadines 0%Suriname Goods: 10%; Services: 8%; Foreign Luxury Items: 25%Trinidad and Tobago 15%1Jamaica charges a 15% General Consumption Tax (GCT) on all goods and services, including hotel stays.It is anticipated in many countries such as St. Lucia that VAT will be introduced in the near future.6.7 Corporate TaxCorporate tax is an income tax that corporations pay as a percentage of net income. This tax is applied on theprofits of firms, as distinct from taxation of the income of their owners. In the Caribbean most hotels do notpay corporate taxes due to the poor reported profitability of the sector and the high initial capital cost ofsetting up hotel operations. However it must be noted that corporate tax in the Caribbean is an average of35% on net income.It is not surprising that corporate profit tax for hotel operations in the CARIFORUM states does not contributesignificantly to government revenues. This is due to the high capital costs and the numerous exemptions viaincentives that are granted on corporate taxes for hotels. In most CARIFORUM countries, the low level of profittaxes can be explained by the impact of granted concessions (which can be applicable for as much as 15 yearsfrom start of development) and low level of profitability after the concession period. While this form of taxationTaxation & Operating Costs for the Caribbean Hotel Sector