Prime Minister Gaston Browne has raised concerns about the structure of Antigua and Barbuda’s ABST system, arguing that the current arrangement may be allowing some businesses, particularly hotels, to reclaim significant amounts of tax while reducing government revenues.
Speaking on his weekly radio programme on Saturday, Browne said he has instructed finance officials to examine whether the existing system remains appropriate for the country’s economy and to explore possible alternatives.
The discussion arose during a conversation about the tourism sector, where Browne said some hotels are able to offset large amounts of Antigua and Barbuda Sales Tax (ABST) through the current input-output mechanism.
“One thing I wasn’t too happy with is the ABST and the structure of it,” Browne said.
The prime minister explained that under the current system, businesses can claim credits for ABST paid on goods and services purchased for their operations, offsetting taxes collected from customers.
Using the hotel sector as an example, Browne said a resort may collect millions of dollars in ABST from guests but could also accumulate substantial tax credits through imported goods, food, beverages and capital investments.
“They may charge the guests the 14 percent,” Browne said. “But then all the goods that they import into the country, all the food, the beverage, even the capital purchases, if they paid $20 million in ABST, then it is set off and we owe them.”
The prime minister suggested that the system may not be delivering the best results for Antigua and Barbuda because the country does not have a large manufacturing sector.
“I don’t think it works well for us,” Browne said. “It works well for countries that have a large manufacturing base because you’re trying to incentivize domestic purchases.”
According to Browne, the ability of some businesses to reclaim taxes paid on imports may create unintended consequences and may even discourage the purchase of locally produced goods.
“As it stands now, having an ABST in which they’re able to claw back, it is actually a disincentive for them to buy local because technically speaking, they’re importing their products free of all duties and taxes,” he said.
The prime minister said he has asked officials within the Ministry of Finance to accelerate a review of the tax structure.
“I’ve asked finance officials to expedite looking at the possibility of replacing the ABST with just a flat sales tax,” Browne said.
Under such a model, businesses would pay a single sales tax without the same level of tax offsets currently available under the input-output system.
Browne acknowledged that any change would need to be carefully structured to avoid double taxation and ensure businesses are not taxed multiple times throughout the supply chain.
“The only thing we have to structure it in such a way to make sure there’s no duplication,” he said. “So you don’t pay at the port and then the retailer pays again.”
The prime minister stressed that no final decision has been made and that the review remains at an exploratory stage.
During the discussion, Browne also suggested that policymakers may need to examine whether different sectors should be treated differently under the tax system.
He argued that hotels serving international visitors operate differently from domestic wholesalers and retailers and that the current structure may not adequately account for those distinctions.
Finance officials are expected to study the issue further and provide recommendations on whether changes to the ABST regime could improve government revenues while maintaining fairness for businesses.
The Antigua and Barbuda Sales Tax currently serves as one of the government’s primary sources of revenue and applies to a wide range of goods and services throughout the economy.
Any changes to the system would likely require extensive consultation with the private sector and could result in legislative amendments before implementation.
Source: Prime Minister Gaston Browne on the Browne and Browne Show.
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This is a very smart thing a sales tax of 5% across the board on all businesses would incur much greater revenue and make the system much fairer for all businesses. ABST is no well suited for a small island and a Sales tax is much easier to check. Smart move Mr. PM
‘Finance officials are expected to study the issue further and provide recommendations on whether changes to the ABST regime could improve government revenues while maintaining fairness for businesses.’
Will not improve government revenues, will lower them.
Which means that the government needs to lower its budget, needs and employees.
But will help the people.
The hard truth is this. Antigua and Barbuda’s persistent economic strain stems less from low tax collection and more from how the government allocates and spends revenue. The unsustainable public debt, heavy public wage bill, and inefficient and wasteful government spending rather than the design of the Antigua and Barbuda Sales Tax (ABST) is our biggest and greatest downfall. More monies collected, the greater the waste!
A careful review is certainly warranted. However, the fact that hotels can reclaim input tax is not, by itself, evidence that the ABST system is failing, it is largely how VAT systems are intended to operate. The more important question is whether Antigua and Barbuda’s broader incentive regime is producing sufficient economic and fiscal returns relative to the tax revenue being forgone.
ABST is essentially a Value Added Tax (VAT). The input-output credit system is not a flaw; it is a core feature.
Under a VAT system, Businesses charge tax on their sales (output tax). Businesses recover tax paid on their purchases (input tax). The tax is ultimately borne by the final consumer, not the business.
For example:
Hotel purchases food and supplies $100 (value) $14 (abst) output, Hotel sells room/services $300 (value) $42(abst 14%) input, Hotel remits to government $28. The hotel collects $42 but receives credit for the $14 already paid, remitting the difference of $28. This prevents tax cascading (tax on tax).
Is the Prime Minister Correct About Hotels Receiving Large Refunds?
Yes, in some circumstances. Hotels can legitimately generate large input tax credits when they construct new facilities, Undertake major renovations, Import equipment, purchase large quantities of goods and services.
During investment phases, refunds can exceed tax collected. However, this is not necessarily a revenue leak. It reflects the principle that VAT taxes consumption, not investment.
The Prime Minister suggested VAT type systems work better in countries with manufacturing sectors. That argument is debatable since Many tourism dependent economies successfully use VAT systems, including Barbados, Jamaica, Bahamas, Mauritius, Maldives just to highlight a few.
In fact, VAT is often considered particularly suitable for tourism economies because a significant portion of the tax burden is paid by visitors rather than residents.
Does the current System discourage local Purchasing? This is perhaps the most interesting aspect of the Prime Minister’s concern. If hotels receive Duty exemptions,Tax concessions, import waivers, while local producers face higher production costs, then imported goods may indeed become relatively cheaper.
However, that issue may stem more from Investment incentive policies, Duty exemptions,
Procurement practices than from ABST itself.
A hotel that buys local products also receives input tax credits under VAT rules. Therefore, ABST alone does not inherently favour imports over local goods.
What Would a flat Sales Tax mean? A pure sales tax would typically tax only the final sale.
Potential advantages include Simpler administration, Fewer refund claims. Potentially stronger short term government cash flow.
Potential disadvantages include Greater risk of tax evasion, Difficulty identifying the true final sale, Tax cascading if poorly designed, Possible increase in business costs, Potential conflicts with regional and international best practices.
The real issue may not be whether ABST should exist but are the concessions, exemptions, refunds, and special arrangements surrounding the tourism sector resulting in lower than expected net tax collections?
If hotels are paying very little net tax because of extensive concessions, policymakers may need to review Hotel incentive packages, dutyfree import regimes, ABST refund rules and local procurement incentives.
These reforms could potentially increase revenue without abandoning the VAT/ABST framework altogether.
Before any change is made, government should examine the Revenue impacts over 5–10 years. Possible Effects on tourism competitiveness, effects on local suppliers and SMEs and Compliance costs.
5. Regional comparators
A careful review is certainly warranted. However, the fact that hotels can reclaim input tax is not, by itself, evidence that the ABST system is failing, it is largely how VAT systems are intended to operate. The more important question is whether Antigua and Barbuda’s broader incentive regime is producing sufficient economic and fiscal returns relative to the tax revenue being forgone.
ABST is essentially a Value Added Tax (VAT). The input-output credit system is not a flaw; it is a core feature.
Under a VAT system, Businesses charge tax on their sales (output tax). Businesses recover tax paid on their purchases (input tax). The tax is ultimately borne by the final consumer, not the business.
For example:
Hotel purchases food and supplies $100 (value) $14 (abst) output, Hotel sells room/services $300 (value) $42(abst 14%) input, Hotel remits to government $28. The hotel collects $42 but receives credit for the $14 already paid, remitting the difference of $28. This prevents tax cascading (tax on tax).
Is the Prime Minister Correct About Hotels Receiving Large Refunds?
Yes, in some circumstances. Hotels can legitimately generate large input tax credits when they construct new facilities, Undertake major renovations, Import equipment, purchase large quantities of goods and services.
During investment phases, refunds can exceed tax collected. However, this is not necessarily a revenue leak. It reflects the principle that VAT taxes consumption, not investment.
The Prime Minister suggested VAT type systems work better in countries with manufacturing sectors. That argument is debatable since Many tourism dependent economies successfully use VAT systems, including Barbados, Jamaica, Bahamas, Mauritius, Maldives just to highlight a few.
In fact, VAT is often considered particularly suitable for tourism economies because a significant portion of the tax burden is paid by visitors rather than residents.
Does the current System discourage local Purchasing? This is perhaps the most interesting aspect of the Prime Minister’s concern. If hotels receive Duty exemptions,Tax concessions, import waivers, while local producers face higher production costs, then imported goods may indeed become relatively cheaper.
However, that issue may stem more from Investment incentive policies, Duty exemptions,
Procurement practices than from ABST itself.
A hotel that buys local products also receives input tax credits under VAT rules. Therefore, ABST alone does not inherently favour imports over local goods.
What Would a flat Sales Tax mean? A pure sales tax would typically tax only the final sale.
Potential advantages include Simpler administration, Fewer refund claims. Potentially stronger short term government cash flow.
Potential disadvantages include Greater risk of tax evasion, Difficulty identifying the true final sale, Tax cascading if poorly designed, Possible increase in business costs, Potential conflicts with regional and international best practices.
The real issue may not be whether ABST should exist but are the concessions, exemptions, refunds, and special arrangements surrounding the tourism sector resulting in lower than expected net tax collections?
If hotels are paying very little net tax because of extensive concessions, policymakers may need to review Hotel incentive packages, dutyfree import regimes, ABST refund rules and local procurement incentives.
These reforms could potentially increase revenue without abandoning the VAT/ABST framework altogether.
Before any change is made, government should examine the Revenue impacts over 5–10 years. Possible Effects on tourism competitiveness, effects on local suppliers and SMEs and Compliance costs and Regional comparators
In this system of governance it is very difficult for one branch of governance would call on another independent branch to do something. That is why these calls should come from the people represented by our so-called reporters. Maybe one day we’ll have truly independent reporters who will do their work without bias. Not aligned to any political party. We now see that they are even boycotting the Weekly Cabinet Press Briefings. They do not seem to have any interest in attending. Very sad. A vital NGO in any democracy. Asking the questions on our behalf. However anytime you post something the editors do not like, you post doesn’t get published without any comment as to the reasons why. Is that what is called Talk as You Like. Or Free Speech with a limit who publishes it or not.
This valie added tax vat disguised as abst is a fraud. It robs consumers since their has been no value added to products. This is robbery. Free us please
Politicians love people with short memories or none… recalled when the ABST was introduced in 2006 by the UPP administration the then opposition ABLP boycotted the entire debate saved for Senator Weston who broke party rank and debated the bill in the upper house…and for that he was fired. The current PM need to tell us why his party boycotted this bill in 2006… please tell us, tell us in parliament not from a private radio station…thanks.
ABST TAX IS A FAILURE, sales tax across the board of 5 to 7 percent will triple the government revenue from this type of tax! It is easier to monitor and all businesses add it on large or small. I am in the accounting field and I have studied it! I am not fond of the government getting more money to waste but I sales tax with no threshold is fair for all businesses. Mr prime minister is a really smart man to realize tius
You notice this two bit swindler is not talking about loosening the burden of the working people in Antigua, the ones who go out everyday and bust their behind to survive, but here he is talking about how to get more money in his government coffers to waste. This is the same man who jacked up this so-called disorganized ABST by 2% a year ago. Huuumm.
Yep..I told you all more was to come, because none of these terrible policies that are being implemented and talked about, were never even mentioned in their campaign, because they knew that they are terrible ideas that the voters would have rejected, especially making Spanish a official language of Antigua. But now they have won, here comes the eunterouge.. 😂
I do not have too much problems with this policy, but it’s the reason for it, not to ease the burden on hard working Antiguan’s, but to put more money in GB hands so he can swindle the Treasury more and more. That’s what I don’t trust about this man, his conniving intents, it’s never for the people, but his own creedy agender.
The hotels in general should be audited frequently to make sure that they are not participating in fraud.
Hotels are businesses and they will ultimately do whatever they must do to make more profits.
Keep it simple: Show me how much you made in ABST in a month and show me SEPARATELY how much the imports had cost you during that same month. I want to see the figures separately so they can be verified.
If ABST was a Sales Tax, you would not have this problem of Offsetting at the input. But it is not. It is just a Value Added Tax. When it was implemented, I made this point to Dr. Cort and the Finance Team. But you know they never think others can have better ideas. You cannot want to have your cake and eat it to. Some businesses such as Hotels will always have their investments paid tax free by the government. Any Tax paid at import should just be an import tax nothing else. And sales tax should be levied on every sale. And yes, you can give exemptions to group of produce or to certain value of business sales. Such as the $300K threshold. A wholesaler that imports goods should not pay any ABST. Only when they sell the goods, they should do so and remit that to the government. The retailer that has purchased the goods should be the only one that can offset the ABST he now is charging his customers before paying in to IRD. ABST on Services should just be considered as Cost of Doing Business. No one should offset those taxes. You hire a plumber and he charge you ABST, that is the cost of doing business. I have also seen this in construction. There should not be any offsetting in that industry. You buy Lumber or Concrete for use and that is it. You pay the ABST applicable. As I said Hotels should Charge ABST to Guests and deliver that to the Government. It is not their money. They Buy food and grocery to feed their guest and the ABST they pay is part of their cost of goods. No offsetting of ABST. The only reason the government wants to take ABST at the port is because they want the money upfront. You cannot have it both ways. I wonder why we have to try and re-invent the wheel. Just look at the region as to what is taking place there. Talk to the IMF that have a wealth of experience dealing with taxation all over the world. People like Rasona cannot think outside the box. She is a real technocrat. Knows her stuff theoretically. The Stanford Group was one of the business models that the government would always own lots of money in ABST. They import lots of building materials and goods for office use. They will never sell any of these goods. I suggest the PM holds consultations with the business community to get buy-inn and hear other ideas. Because don’t fool yourself you may hear some good ideas from others. And your presence is long overdue in a business forum.
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