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New GST Tax Worries Hotel Owners

Despite heavy opposition and debate last week, the new General Sales Tax (GST) bill was passed by the government’s Senate majority on Thursday, December 29, 2005, and though it will become law shortly, the new tax will not be knocking on your door until July 1, 2006, an extension of three months from the previously set date of April 1.

While many businesses are not complaining about the GST tax, the reason being that they can claim GST charges and get refunded by government, it is a different case for those in the tourism and productive sectors. Such as the case of the country’s hotel owners who now find themselves in the box of the GST exempt classifications, which means that they must pay tax, but cannot claim any GST payments.

This is a significant adjustment made by the Government of Belize (GOB) to the GST Bill between the period of the first reading in November 2005 and the third reading made last week Wednesday, December 28, in which government removed the bulk of the items from the zero-rated area to the exempt area.

For hotel owners, not only will the accommodation sector portion be exempted, but the hotel tax will also be upped from 9% to 10%. According to some owners, no incentive is being given to their tourism business as they cannot claim any refunds from the new GST. Add to this problem the growing expenses incurred in running a hotel businesses and not much is left over unless the room rates are increased, which could adversely hurt the tourism industry for Belize.

One member of the Belize Hotel Association told our newspaper this week that the Association will be holding a meeting with government officials this week to discuss the GST issue affecting the hotel businesses in the country and whether any consideration will be given to the hotel/tourism industry.

While government does its part and the hotel association lobbies for its interest, on an individual level just how will the new GST tax affect the average Belizean citizen?

Some folks will definitely see an increase in their light and phone bills. For example, for those whose total light bill is $150 or less, they will be exempted from paying the tax, but those above $150 will have to pay the 10% GST plus the additional rate increase currently being requested by Belize Electricity Limited. Others who work in the productive sector will also be adversely affected, according to the General Manager for the Belize Chamber of Commerce.

“This (GST) is not acceptable to us,” Kevin Herrera, General Manager Belize Chamber of Commerce told 7News. “We feel that we were trying to get a much better deal than the bill which was presented in the first place and what we saw was a much worse deal than the original bill. Actually we lost a major opportunity to have done something really good for the productive sector, for those people producing goods and services within the country. We had the opportunity to possibly lower the cost of production in many of those cases. What we have done is we’ve actually limited the ability of producers of goods and services in the country to reduce our cost of production and claim their inputs. Of course, the ideal situation would have been for all our products and services that are produced locally be zero-rated, and I think we must remember that we do not only compete in Belize, within the borders of Belize, but we are competing with the Chetumals, we are competing with the Melchors, we are competing with the neighbors, with the Miamis, and those type of things. So if items are more expensive, significantly more expensive, what will happen is people will go over the border and get them cheaper and that in effect is what will happen and I think we have to try to protect our productive base as much as possible.”

Under the UDP’s 15% VAT, there were over 700 zero rated items; under the PUP’s 10% GST, there are fewer than 5. The government argues that the greater the number of zero ratings, the higher the tax, while the Opposition argues that this almost exemption free tax is a cash cow for government.

“If too many goods and supplies are zero rated, it narrows down the tax base and puts pressure on the rate of tax,” said Prime Minister Said Musa. “It is true that some of these items were zero rated under the old VAT system, but the rate of VAT was 15%. We have decided to maintain the uniform rate of 10% for GST.”

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