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Belize Budget Overhauls Energy, Tourism Taxation

by Leroy Baker,, New York

05 July 2012

The recently-delivered Belizean budget for the fiscal year 2012/13 contains a number of largely tax-neutral proposals to restructure aspects of the nation's tax regime.

The Budget provides for a comprehensive reform of the system of taxation on the import of petroleum products, to reinstate the regime that was present until a change last year. The government had removed General Sales Tax (GST) and instead applied a specific rate of import duty on the three major fuel products. This change included the provision of GST credits to qualifying businesses and individuals who use fuel during the course of their economic operations. This reform was intended to ensure taxes remained level despite a significant fall in crude oil prices.

The government has said that, while the change was sucessful in stabilizing taxes on fuel, there were a number of unanticipated distortions in the GST refund system. The government has noted that it had received a number of requests from businesses for a return of the previous regime, which consisted of a combination of General Sales Tax and Import Taxes. The change contained in the Budget will reintroduce GST on fuel, lower import duties by a commensurate amount, and remove the GST Special Credit.

Next, following the nationalization of Belize Electricity Limited, the government has announced that it is to amend the Income and Business Tax Act, to cut the rate of tax on entities licensed to provide electricity, from 6.5% to 1.75%.

Lastly, the government is to repeal the Hotel and Tourist Accomodation Tax and bring the provision of hotel accommodation services under a 12.5% GST rate. This is in response to a long-standing complaint from hotel and tourist accommodation providers that they are unable to claim refunds from GST paid on their inputs. The change is expected to be effective from January 1, 2013.

Other changes made in the budget include measures to liberalize the nation's trade regime, in line with Belize's World Trade Organization commitments and those agreed under the Economic Partnership Agreement with the European Union. This will include the removal of 62 items from a list of 121 goods that require an import license. Instead, a temporary tariff surcharge of 20% will be levied on those items for a transitional period of twenty four months to shield local industry from the change.

TAGS: tax | business | sales tax | fiscal policy | law | international financial centres (IFC) | budget | tariffs | World Trade Organisation (WTO) | goods and services tax (GST) | Belize | travel and tourism | import duty | trade | services

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