Former Minister of Economic Development, Mr. Kyle Hodge has posed questions linked to the Goods and Services Tax (GST) to the Honourable Premier Dr. Ellis Webster in his capacity of Minister of Finance during a Sitting of the House of Assembly on July 11th, 2023.
It was the second time in two weeks that the Honourable Single Island-wide Electoral District Member would have posed questions to the Premier. His first set of questions concerning the conduct of Minister Quincia Gumbs-Marie were disallowed by the premise that, according to the Rules of the House, they were “out of order”.
The GST related question, however, concerned Government’s repeal of Accommodation Taxes from the hospitality sector, whereas hotels still charge Accommodation Tax to their guests and pay it in under the GST structure.
Mr. Hodge asked:
(a)“Having recognized from June 2022 that the equivalent revenue collected by the hotels, previously identified as accommodation tax, is now being paid into the GST structure, has the Government taken any steps to ensure that hotels cannot claim back against this payment under the GST structure? And if the answer is yes, what steps have been taken?”
The Minister of Finance responded: “Madam Speaker, Government at this time do not believe that it is appropriate to take steps to ensure the hotels cannot claim back against GST paid for Accommodation Taxes because it will discriminate against the [hotel] sector based on how the law is applied.”
“Firstly,” he continued, “It is incorrect to assert that the equivalent revenue collected by hotels, which was Accommodation Tax is now collected and paid as GST. A supply of short-term accommodation is subject to GST at the standard rate of 13% whereas Accommodation Tax was 12%.
“In addition, Accommodation Tax was preciously applied to a base, which was narrow, being only the accommodation charges.
“However, the GST applies to not only accommodation charges but to other services offered by the hotels which include: food and beverages; spa services, island tours, snorkeling sand fishing; rental of business facilities; gifts, boutique items and other goods, charges for internet access in the rooms; charges for extra tv channels and movies; charges for the use of a child’s cot or crib; charges for the use of sporting facilities such as the gym, tennis courts or golf course. These goods and services are subject to GST at the standard rate of 13%.
“Furthermore, in line with the best practice, the Ministry and Inland Revenue Department (IRD) continually monitor the administration of GST to improve the efficiency of tax collection. The IRD initiated the Monitoring, Evaluation and Learning Report where the continually monitor the administration of GST with the aim of addressing issues in a timely manner.”
Premier Webster went on: “To date, the accommodation sector is responsible for remitting the highest amount [of GST] in comparison to other sectors.”
He gave an explanation of how the input and output of GST works in comparison to Accommodation Taxes: “1. You declare your total output tax and input tax on your month GST Return. All purchases and sales must be declared in the tax period in which they occurred.
“2. Input tax is offset against output tax. If your output tax exceeds you input tax, the difference is remitted to the IRD. If the input tax exceeds the output tax, you would be in excess credit position, and may be eligible to claim a refund after three consecutive tax periods. This is the treatment across all sectors that are registered for GST.”
“Generally,” he noted, “we only expect hoteliers to be in an excess credit position through periods of major development or construction.”
Mr. Kyle Hodge asked further: (b) “One year on since June 2022, has the Government been able to determine whether in fact the sector is now paying ‘less tax’?”
The Minister of Finance answered: (b) Given the revenue collected from the GST with accommodations sector, having the highest remittance it is safe to say that the sector is not paying less.
Mr. Kyle Hodge asked: (c) If the revenue from Accommodation Tax is removed from the GST structure and the Accommodation Tax Act reinstated, what is the anticipated revenue to the Government of Anguilla?
The Minister of Finance replied: (c) The highest annual Accommodation Tax receipts were collected in 2019, which totaled $30,186,158.41. Of this amount, $5.7 million related to arrears of revenue and therefore less than 25 million related to 2019 tax receipts.
In the period July 2022 to May 2023, which is less than 12 months of collections, GST collections for the accommodation sector, totaled $36.197 million.
Additional amounts came from related services including $4.8 million from restaurants & catering during the same period.
To provide an estimate for accommodation tax going forward would be difficult as the data supplied in the GST returns from hotels is not granular and therefore further information would have to be requested of hotels to
supply a robust estimate of the potential or theoretical accommodation tax receipts relating to 2023 and beyond.
However, as a purely hypothetical exercise, under the MTFF the revenue and expenditure decisions are costed, which includes the ascertaining of the net improvement related to the GST implementation.
Under this theoretical exercise, the forecast for accommodation tax receipts for the full 2022 and 2023 financial years would be 26.99 million and 31.07 million respectively. These projections grow 2021 collections as a base by preliminary and projected nominal GDP Growth estimates for 2022 (41.27%) and 2023 (15.2%) respectively which is standard practice for forecasting growth of tax revenues which are strongly correlated to economic growth.
Mr. Kyle Hodge then asked a fourth question: (d). Since the implementation of GST, how many businesses have been charged penalties under the GST Act?
The Minister replied: (d) Some businesses were charged penalties due to late filing and late remittance of GST. The Act makes provision up to July 31 2023 for transitional provision in relation to the remission of specific penalties. Since the July 1st 2022 implementation date, 117 taxpayers have received penalties under the GST Act. Thirty-six of those taxpayers are within the accommodation sectors while 81 operate in other sectors.
Mr. Kyle Hodge then followed up by inquiring: (e) How much revenue has the Government of Anguilla collected in penalties from the hospitality sector versus the Anguillian business community?
The Minister of Finance answered: (e) Tax assessment with penalties paid was a total 143. Of this, the Accommodation Sector had a total 40; Other Sectors made up a total 103. The hospitality sector is largely compliant with on time filing and remittance of the GST. Since implementation date, the IRD has collected EC $1.38 million in penalties and a further EC $ 202K in interest.
The total amount of GST penalties collected from the accommodation sector is EC $53.6K while EC $1.3 million was collected from the other sectors. It should be noted that one large taxable entity (not within the accommodation sector) accounts for 70% of all penalties collected due to some special circumstances of that taxpayer. That entity has remitted EC$ 964.33K in penalties to date. They currently have a further EC $328.04K remaining in penalties being paid via payment agreement.
Mr. Kyle Hodge further asked: (f) What is the dollar figure of GST collected by sector since 2021?
Premier Webster answered: (f) GST was first implemented on July 1, 2022 and as such, no GST was collected in 2021. During the period July 2022 to May 2023, GST collections are as follows:
Sector Total GST Due % of Total
(July 2022 – May 2023) EC$ GST Due
Accommodation $ 36,197,100 51.5%
Public utilities $ 13,332,653 19.0%
Restaurants/Catering $ 4,798,859 6.8%
Retail $ 3,991,973 5.7%
Manufacturing $ 3,141,462 4.5%
Wholesale $ 2,203,745 3.1%
Professional Services $ 2,178,869 3.1%
Other Services $ 2,028,005 2.9%
Real Estate $ 957,579 1.4%
Construction $ 888,501 1.3%
Tourism Services $ 713,386 1.0%
Financial Services $ 451,207 0.6%
Statutory bodies $ (612,347) -0.9%
Total: $ 70,270,993
Finally, Mr. Kyle Hodge asked: (g) How much total refunds have been paid out by sector since 2021?
The Minister of Finance responded: (g) The Goods and Services Tax was implemented from July 1, 2022 and not in 2021 as the question is suggesting. Therefore, to answer the question, it would be none.
Essential Information
• Most GST due to IRD is generated by Accommodation and Public utilities, a combined percentage of 67.8%.
• Tourism-related sectors make up 47.7% of GST due.
• The revenue collected from GST between July and December 2022 amounted to EC$ 52,913,717.50, largely exceeding the EC$ 35 million revenue target for that fiscal year.
• GST collections at the end of June 2023, net refund payments, totaled EC$94.99 million, which has surpassed the annual target of EC$90.7 million.
