PM: Hoteliers must take responsibilty . .

At yesterday’s House sitting Prime Minister Kenny Anthony tried to explain why the rate for hotels for Value Added Tax (VAT) would be at eight percent, as opposed to the 15 percent that had been instituted for other businesses across the board on October 1st.
In his explanation of a motion for Parliament to approve the VAT rate for hotels and other tourism providers the prime minister gave some background on the discussions with the hotel sector.
“Before the Value Added Tax legislation came into force the hotel sector through the SLHTA approached the government of St Lucia asking for a range of concessions in respect of the Value Added Tax legislation,” said the PM. “The SLHTA made two points to support their argument. First, they said they had entered into contracts with tour operators and other entities overseas for specific periods of time and these tour operators and other agencies needed time to make adjustments to the existing contracts. And they made it absolutely clear to the SLHTA that if the VAT was imposed upon them in respect to those services then they would have to bear the cost of the VAT . . . The second [issue] was that the situation with the hotel industry continues at best to be tenuous. While it is true that we may have had an increase of arrivals the rates continue to be heavily discounted. So that in truth and in fact since the recession took hold those rates have not increased . . . The income has in fact remained fairly static.”
This explanation out of the way PM Anthony said that the hotel sector deserved “sensitivity” from the government at least at this time. He did not say what exactly made this sector any more special or deserving of preferential treatment than the other sectors of the economy that have also been affected by VAT. It is worth noting that before he began to address the issue of the special VAT rate for hotels he added that any other sector that wished to benefit from concessions relating to VAT would only receive this after it came before parliament. It was almost as though the PM expected other sectors of the economy to cry foul.
Other issues that the PM said impacted the decision to grant the eight percent VAT rate to hotels include the amount of unpaid Hotel Accommodation Tax (HAT) the sector owes to the government—a whopping $36 million!
“Sometimes I fear that even the hoteliers don’t understand the legal importance of collecting money from guests and then retaining that money,” Dr Anthony said. “Once the hotels charge their guests HAT the hotels have a duty to hand over the money to the government of St Lucia. The hotels are in the position of trustees of public funds. When they do not pay over the monies that they collect to the government of St Lucia they commit an offense under the law. The government of St Lucia offered the hotels the opportunity to deal with the arrears situation and to tidy up their books . . .”
The Prime Minister also highlighted that the sector was not making information about their hotel operations readily available to the government, especially in terms of the cost of services within the sector.
“I have asked the SLHTA for its cooperation in assisting the revenue generating arms of the government to arrive at decisions by providing the information that is necessary,” PM Anthony said.
The VAT rate of eight percent for hotels and related services will extend until April 2013. The prime minister emphasized to hoteliers that this arrangement is temporary and added that this VAT concession was the “most generous” in the region. The tone of the PM’s address then changed as he turned to how much has been spent by successive governments in order to aid the tourism sector.
“Money has had to be borrowed for the marketing of hotels,” he stressed. “And I suspect the amount borrowed over the last ten years would probably approach between 100 to 500 million dollars. The argument will be that while the government is borrowing, look at what the government is getting on the other hand in respect of HAT. That may be so. But the amount you collect from HAT is far below what you are spending on marketing.”
By the PM’s estimation the tourism sector accounts for 14 percent of GDP.
“As this country is crafting a model of taxation for the future,” the PM warned, “it is going to be essential that there is equity in taxation. That some sectors step up to the plate and accept their responsibility for the economy. It is a challenge for the hotel sector to understand that since it has the lead role in tourism then its responsibility to the economy has to be commensurate with that dominant position. At the same time as a government we have to be sensitive from time to time to the challenges that face [them].”
The PM went on: “We are opting to be sensitive to those challenges at this time to agree to the eight percent but as I have indicated that eight percent cannot endure ad infinitum. It will be necessary for the adjustments to take place.”
Finally: “I want to make it absolutely clear that this regime will only continue until budget time and at budget—after further consultations with the SLHTA, and I emphasize the word consultation because the decision at the end of the day is with the government of St Lucia . . . I hope the record is clear.”