A letter from the Aruba Hotel & Tourism Association and the Aruba Gastronomic Association went out this week to the attention of our venerated members of parliament.
Both associations noted that the rubber-stamp senators will start deliberations relating to the introduction of BBO/BAVP/BAZV at import, and urged them remove the cotton in their ears and make a small change, which would turn the discriminatory propose law into something the island can live with, a less damaging measure, providing that indeed: A. BBO at border will be collected from businesses that currently operate in the grey economy and from residents who import goods. B. That the surplus from the 1% BBO increase is acknowledged, and accounted for. C. That tax enforcement and compliance increase and that D. GOA finally relents and attempt to reduce its expenses and alleviates the burden placed on the community to finance the government apparatus.
So what’s the small change which would turn the discriminatory propose law into something the island can live with??
It’s the term, Trade Goods, handelsgoederen, in the language of the law. AHATA & AGA asked to nix the term, erase it, in order to level the playing field, and PREVENT a huge price increase.
AHATA & AGA explained: The current law text limits the offset of the 7% turnover taxes paid at import against the BBO collected from customers to trade goods (“handelsgoederen”) only. The law has no clear definition of trade goods and limited examples in the Explanatory Notes, which will create a lot of discussion about what is considered trade goods and what isn’t. It is also difficult to administer and difficult to audit by the tax department.
The Explanatory Notes (“Memorie van Toelichting”) specifically excludes restaurants and hotels from eligibility for offset, although in the GOA press conferences on June 22nd it was mentioned that the restriction for restaurants would be lifted. No further guidance or legislative substantiation has been submitted – beside the verbal promise yesterday, to anchor it in a decree, not by law.
All companies and stores, even the ones solely selling “handelsgoederen”, import items that are not for resale. Examples: forklifts for warehouses, equipment, supplies, products required by franchise agreements, items not available on island, etc.
The limitation of offset of trade goods has a direct effect on cost for all businesses and consequently on consumer prices.
In the last 10 years, cost of doing business has already increased significantly, because of previous measures, and here is the list of the draconian measures introduced: Turn over tax, went from 1.5% to 7%; Minimum wage increase; AOV employer contribution increase; Decrease in work hours; Bank fees on sale of foreign currency increase; Bank fees on purchase of foreign currency increase; Waste management tipping fees increase; Property, ground tax increase; Limit imposed on depreciation; Alcohol, excise taxes, and import duty increases; BBO on insurance introduced; Added employee benefits; Turnover tax added to foreign electronic services and increases of electric and water rates.
With the introduction of an additional 7% cost for import, all Aruba’s prices will increase even more.
Each company’s cost increase will be compounded by the fact that each local vendor that supplies or services them will also need to increase their prices.
Specifically EXCLUDING restaurants and hotels from the offset is discriminatory and simultaneously creates immense increases in Cost of Doing Business, which results in a higher cost of dining for locals and for tourists.
(As of yesterday, there is a verbal promise to include restaurants and hotels by decree, not by law, which raises the question, WHY?)
Aruba is considered an expensive tourism destination, and the measure of exclusion, will make restaurants (and other businesses) even more expensive, increasing risk for the industry.
If a supermarket is allowed to transform their imported chicken into chicken salad and be allowed to offset the BBO (as per the Government press conference on June 29th), then restaurants should also be allowed to cook the chicken and be eligible for the offset. Equal treatment in law is of essence.
The fact that the limitation of trade goods will cause such large increases in prices and a burden on the local community, requires that the limitation be eliminated from the law. By eliminating the term (“handelsgoederen”), the law becomes less damaging to business and the community.
With this change, the law is closer to the preferred BTW system and an increase in tax revenue would still be achieved because it forces businesses that currently operate in the informal economy to pay at import.
The reason given by GOA’s representatives for needing the limitation of trade goods in the law, is that GOA needs higher revenues to pay off debt. However, on the other hand GOA is issuing bonds, at a 6.5% interest rate cost, to raise capital while lower interest loans are available via The Netherlands. Meanwhile, there has been no transparency on the surplus income GOA has been receiving since increasing BBO by 1%.
The above letter was a follow up to a public meeting with parliament on June 22nd, AHATA & AGA wished to register their misgivings about this new law, for parliament’s urgent consideration.
GOA has a deficient track-record as far as listening to private sector concerns, it marches to its own political music, operating in an echo chamber, unwelcoming any external input.
