Liquor tax licks hotels in Jamaica
Published:Monday | December 13, 2010 | 12:00 AM
Janet Silvera, Senior Gleaner Writer
WESTERN BUREAU:
THE HOTEL industry will have to fork out an extra US$20 million (J$1.8 billion) annually to purchase spirits and keg beers to service their guests as a result of the restructuring of the alcohol tax regime, says the sector's largest supplier, Caribbean Producers Jamaica Limited (CPJ).
According to Tom Tyler, CPJ's co-chairman, the Government's revamp of the special consumption tax last week will see the cost of rum, vodka, gin, brandy and others skyrocketing by up to 100 per cent, owing to a tax rise of 400 per cent.
"And this is only on liquor with 40 per cent alcohol content," said Tyler.
After three years of aggressive lobbying by all major distributors, duties were reduced on wines and spirits in 2005. Tyler believes the Government's intention was not to increase taxation on spirits and beers used in the hotel sector.
This time around, no provision was made to distinguish the hotel industry from the rest of the market.
"Prior to the change, a standard 12-litre case of spirit was sold to the hotel industry at a mean price of US$35, attracting tax on each case of US$8.75," said Tyler.
Under the new tax regime, a 12-litre case has attracted an increase of 400 per cent, or US$54.21.
"The difference between these two taxes is US$45.46," explained Tyler.
Although stouts and other beers escaped a whack from the latest swing of the tax axe, keg beer - which hotels use - won't be so fortunate.
President of the Jamaica Hotel and Tourist Association, Wayne Cummings, in a letter to Finance Minister Audley Shaw, described the situation as a "death sentence to beverage services" within the tourism sector. He said the new regime will send spirit prices through the roof.
According to Cummings' letter, he has already received information that the Spanish hotel chains and Sandals Resorts have advised their suppliers that they will not be accepting products at the new prices.
But CPJ's Tyler stated that his organisation, as well as J. Wray & Nephew, will be posting a new price list today. Both companies stopped distribution of alcoholic products to the sector last week in protest that there was no consultation about the changes, said Tyler.
He also disclosed that CPJ and Wray & Nephew did not clear containers of liquor at the ports for the first 10 days of December. "Hopefully, this will be resolved next week," he said.
The CPJ executive is suggesting that in order for there to be no increases to the hotel industry, the Government should place the 40 per cent alcohol content and keg beer into the two-tier system that now exists.
"A different per-litre charge for the tourist industry is necessary," he said.
Tyler believes technocrats did not realise that keg beer would be affected dramatically.
"The hotels use keg beer primarily. They will now pay US$15.92, whereas before they were paying US$7.35 per 30-litre keg," he argued.
The hotel industry uses an average of 200,000 kegs per year.
The tax reshuffle comes at a time when the industry has been under extreme pressure from the global recession. In the last six months, tourism has absorbed dramatic commodity price increases that have driven up food costs, in many cases by 25 per cent.
Commenting on the issue, Dr Wykeham McNeill, opposition spokesman on tourism, said this was an unnecessary stumbling block for an already hobbling industry.
McNeill is calling for the Government to quickly resolve the dispute surrounding the tax imposition.