CHTA warns against tax reforms in Dominican Republic that could undermine Caribbean tourism

Santo Domingo.- In a recent statement, the Caribbean Hotel and Tourism Association (CHTA) has raised alarms regarding proposed long-term tax reforms that could eliminate crucial fiscal incentives for the tourism sector. The CHTA argues that such changes could have detrimental effects on economic development, employment, and government revenues across the Caribbean.

The association emphasizes that these fiscal incentives are vital for offsetting the high operational costs faced by businesses in the region and play a significant role in attracting foreign investments. The CHTA’s statement comes in the wake of ongoing fiscal challenges faced by Caribbean governments, particularly in the aftermath of the COVID-19 pandemic.

“Tourism has been a driving force in the economic recovery of the Caribbean, restoring jobs and government revenues more rapidly than anticipated,” said Sanovnik Destang, president of the CHTA. He highlighted that while investments in public infrastructure, healthcare, and social services are essential, removing tax incentives without viable alternatives could stifle growth, reduce competitiveness, and limit job creation.

The CHTA points out that tourism operates as an export sector, generating foreign exchange as international visitors spend on local goods and services. However, increasing taxes on essential inputs like infrastructure and hospitality could raise costs and push tourists toward more affordable destinations. The association insists that maintaining fiscal incentives is crucial for sustaining growth, enhancing service quality and boosting foreign exchange earnings.

A significant challenge facing the Caribbean tourism sector is the aging hotel product, which requires renovations to meet global standards. Without financial support, hotels may struggle to maintain competitiveness, further jeopardizing the region’s tourism appeal.

The CHTA also referenced successful tax reform examples, such as Jamaica’s Omnibus Incentives Act of 2013, which streamlined fragmented incentives while encouraging investment and maintaining tax contributions. In contrast, the proposed tax reform in the Dominican Republic aims to replace a successful incentive structure with broad tax increases, potentially undermining tourism’s role as a key economic driver.

The association warns that recent tax hikes, such as the increase in VAT in Antigua and Barbuda, coupled with the removal of key incentives, are already elevating costs and threatening the sustained recovery of the tourism sector.

“Tourism is more than just an economic engine; it is the backbone of our economies,” Destang stated. He urged governments to consult with tourism stakeholders when designing fiscal policies, advocating for a collaborative approach that fosters long-term growth and enhances local participation while increasing tax revenues.

The CHTA remains open to working with institutions like the IMF and the World Bank to create frameworks that support tourism growth while addressing fiscal needs. “Together, we can ensure that tourism remains central to the Caribbean’s recovery and overall community development,” Destang concluded.

As the Caribbean navigates its post-pandemic recovery, the CHTA’s call for careful consideration of tax reforms highlights the delicate balance between fiscal responsibility and the need to sustain a vital economic sector.