THE tourism sector is set to get an exemption from paying General Consumption Tax (GCT) on certain imported services that currently cost the industry close to $18 billion a year.

During his Budget presentation this month, the Minister of Finance and the Public Service Audley Shaw indicated that there will be an amendment to the GCT Act to revise the 2003 law which speaks to the application of taxes on imported services.

The amendments will surround the areas of instituting the mechanisms to administering the law, both in terms of defining what is considered ‘imported services’ and ways of accounting for and collecting the taxes on these services.

“Cabinet is also considering an amendment to the GCT Act, aimed at strengthening the provisions as they relate to importer services, as well as to provide a standard method of calculating input tax credits in situations where there is a combination of taxable and exempt supplies,” Shaw said. “The amendments now proposed will also clarify the definition of imported services and specify exemptions and set a threshold for the purpose of charging GCT on imported services.”

One of those exemptions appears to be the tour and reservation activities for the tourism sector overseas.

Wayne Cummings, president of the Jamaica Hotel and Tourist Association, told the Business Observer that the tourism sector pays approximately 10 per cent of its US$2-billion ($179-billion) earnings on tour and reservation promotion activities overseas, but that he had in writing a commitment from the Government to make exempt, taxes on imported services that concern these activities.

“We have an assurance from the minister. We have it in writing that the tax on the imported services would exclude tour operators and commissions,” Cummings told the Business Observer yesterday. He said the 10 per cent of the revenue is paid on just commission for the overseas companies to bring business to Jamaica.

He said the agreement was “hard fought for” and involved many calls on the minister following his presentation last year, when the proposed amendment was first alluded to.

“We are focused on the cost of doing business in terms of commissions,” said Cummings. “We believe that our business model in the planning of travel would be affected.”

However, the industry is not totally spared from the additional tax.

Last week, at a forum put on by Mayberry Investment Limited, tax specialist Ethlyn Norton Coke, noted that the tourism industry should feel the major effects of the proposed revision.

“One of the industries that this will severely affect is tourism because they import so many services,” Norton Coke said.

Even though travel and reservation services are to be exempt, other services in tourism that could potentially attract such a tax are epicurean services, the staging of conventions, sporting events, music festivals and other entertainment events, health and wellness services where these are imported as part of health tourism, and hotel construction services.

Cummings said he understood the legitimacy of taxing some construction services, especially where imported, because persons who contract architectural firms overseas would avoid the GCT that applies to the local architectural and construction services, thereby making it more costly for those who utilise such services locally.

“If people come to this country and trade then they ought to pay their taxes, unless there is a bilateral agreement or a tax treaty which prevents them from doing so,” Cummings said.

A member of the Technical Specialist Unit of the Taxpayer Audit and Assessment Department told the Business Observer that “the idea behind the reform is to merely level the playing field and to not give importers of services an advantage over those accessing these services locally”.

He said it was not a move to make business operations more costly. Therefore, some aspects of the tourism and financial services sector, which also imports services, would be tax exempt.

Where the financial sector is concerned, any person hired by the local company as a consultant or any other manager would be liable for tax on the services under the proposed revision, once the service is performed or delivered in Jamaica. However, the consideration is that for multinationals, services by employees from parent to subsidiary or one subsidiary to another may not be taxed.

“If it is the same employer, legislation would be put in place to prevent that sort of thing,” the tax specialist said.

However, in an effort to reduce the cost of promotional activities overseas, the Jamaica Tourist Board (JTB) plans to use more technological marketing strategies, as outlined by Minister of Tourism Edmund Bartlett. He said the JTB had embarked on a “comprehensive online marketing strategy”, that includes the use of social media: Facebook, Twitter and Youtube as well as reaching travellers through their smartphones. Bartlett also encouraged Jamaicans to support the island’s tourism products. Jamaicans contribute $27 billion annually to the tourism sector.