The Government of the British Virgin Islands has recently enacted two revenue-increasing measures. One raises the tax on alcohol and tobacco, and the other on hotel accommodation. Both of these measures were shadowed in previous bulletins but are now in force.
Firstly, the Customs Management and Duties (Amendment of Schedule 4) Order 2016 raises the duty on alcohol and tobacco. The previous system, which was based on fixed fees per gallon, served to promote certain types of product (for example beer) against others (for example whisky). The new system is based on percentages of value. It does not differentiate between product types, raising the duty on all.
Previously, in broad terms, beers were taxed at US$1.10 per gallon, wine at $1.20 per gallon, brandy and whisky at $3.00 per gallon, and rum, vodka and gin at $2.30 per gallon. Now all alcohols are taxed at 25 per cent of their value.
Similarly, raw tobaccos were previously taxed at $0.50 per pound and prepared tobacco products (for example cigarettes) at $0.55 per pound. Now all tobaccos are taxed at 50 per cent of their value.
“Value” is obviously a flexible concept but for these purposes it is the normal price, ie the price which they would fetch, at the time when the charge to duty arises, on a sale in the open market between a buyer and a seller independent of each other.
Secondly, the Hotel Accommodation (Taxation)(Amendment) Act 2016 seeks to increase the current hotel accommodation tax from seven to ten per cent. This brings the BVI into line with other premier holiday destinations in the Caribbean, although the rate is still less than many US destinations.
Both of these measures have been published in the Official Gazette and are now in force.