PROPOSED tax reforms will lead to the “demise” of the tourism industry and cause the Jamaican dollar to “plummet”, an industry association warned.

Hotels and attractions will close and staff will be laid off, Evelyn Smith, president of the Jamaica Hotel and Tourism Association (JHTA), predicted yesterday.

And the resulting fall in foreign earnings will put further pressure on the already weak currency, currently at $87 to US$1.

“Our industry stands as the first line of defence against precipitous declines in the value of our currency,” she said.

The extra tax burden could force larger tourism operators to cut staff to survive, while smaller businesses will be forced to close altogether, she said.

The proposals, submitted to Parliament last month by the Private Sector Working Group on Tax Reform, call for the corporate income tax (CIT) and the general consumption tax (GCT) to be more widely applied, but at lower rates.

JFP (formerly known as Jamaica Fibreglass Products) owner Metry Seaga, a member of the Working Group, said he thought the sticking point was the proposed ending of a GCT tax break enjoyed by the tourism industry, which currently collects 10 per cent for the Government instead of the usual 17.5 per cent.

The Working Group has proposed that the rate be standardised at 12.5 per cent across the board.

But the JHTA said that, while it supports reform in principle, the specific proposals were neither fair nor equitable.

Other concessions under the Export Industry Encouragement Act and for the Free Zones — primarily helping call centres — are to continue until an omnibus incentive bill is passed, it noted.

“It is foolhardy,” Smith said.

The association had called for the proposals to be delayed until it could amass data supporting its case, including a study it has commissioned from Oxford Economics into the impact of tourism.

But Seaga said: “After 20 years of incentives they should have had these numbers at their fingertips.”

Tax reform was one of the requirements under the currently languishing International Monetary Fund stand-by funding package negotiated by the

last Government.

Support of all parties is needed to push the reforms through, said Seaga, as this could be the last chance the country has to fix the problem.

“This tax reform is bigger than any government, party or sector,” he said. “It’s what Jamaica needs to get us out of the mess we’re in.”

Among other things, it aims to capture revenues from the 95 per cent of Jamaica’s 60,000 registered companies that currently do not pay CIT.

The JHTA also challenged the Working Group on its proposed extension of GCT to basic items to be offset by $2 billion in targeted assistance for the poorest 20 per cent of Jamaicans.

The move would increase the cost of living for thousands of tourism workers, it said.

The tourism industry is already suffering from a number of financial blows, including the doubling of the tourism enhancement fee, a rise in the British air passenger duty and the looming European Union travel tax.

The current tourist season has seen little or no growth, after a decline in arrivals of 0.3 per cent for May-November 2011, the JHTA said.

The tax reform proposals have already been attacked for threatening the survival of the junior stock market and for making life harder for the poor.