I don’t know much about it. But from what my accountant explained, the hotels better beware because among new tax legislations hides one that will have a huge impact on the hotels, if enacted: Depreciation will no longer be deducted from bottom lines. (Businesses will not invest, if indeed.)
So Imagine a new property, opened in 2018, got hit by Covid19 plus, and next year, zero depreciation recognized as a deduction from the already anemic bottom line.
Tax lawyers, who write legislation, my accountant explains, only want to make it as complicated as possible, so that we cannot operate without them. Therefore, all stakeholders must be involved in the decision-making process otherwise we are facing a major decline in tourism.
Why? Because an average visitor spends x amount of money in Aruba. That budget shall remain more or less constant. However, hotel rooms will now be more expensive as a result of the tax reform nixing deductions to bottom line.
Room rates more expensive? Less visitors on island.
Recently at the Hilton Aruba Caribbean Resort & Casino the President of our Supervisory Board held a public event in which he outlined what needs to be done in order to save our skin.
Parliamentarian Miguel Mansur says: I think it’s a great initiative of CFT to inform the general public as their periodic meetings with Government and Parliament are not heeding the desired results. Gradus lectured at InterExpo in November and his message is accurate, unbiased and has the island’s best interest at heart.
So what else did Gradus recommend — he did not explicitly mentioned the depreciation deduction, but he said that supermarkets should be able to sell paracetamol as an over the counter drug.
Ach Sprach Gradus: We must seriously adhere to the reforms outlined in the Landspakket, and follow their suggested timeline in order to be successful. Aruba needs to reduce its debts, create a budget surplus – which was almost achieved, before the pandemic arrived — spend less on products and services, get below the pre-pandemic level, and at least attempt a nominal structural reduction of public sector employees.
My friends in F&B have a suggestion, don’t just fire people, that’s not the intent, help them transition to F&B. Direct 12.5% of GOA’s employees into HORECA, it would be a win-win.
At the moment it seems that GOA only focuses on the about-to-be-introduced VAT. Gradus reminded his audience that there ARE other equally important elements to the reform, as recommended by the IMF, and they all have to do with a crack on deductions, less on mortgage interest, less on credit interest, less on employment expenses, and more taxes perhaps on sin, sugar, tobacco, gasoline; a higher wealth tax.
We have been saying this for the past two years, and asking everyone to spend less, but it’s like talking to the wind. This is the second term for MinPres and she doesn’t want to lose the next elections for her party. This restructuring business is no joy, and I think it will be up to the other Wever in the government, Geoffrey Wever: Minister of Economic Affairs, Communication, and Sustainable Development, to bite the bullet and show us what he can do.
