Crackdown on Duty-Free Shopping to Address Revenue Losses: Prime Minister Announces Audits and Contractual Engagement Measures

Prime Minister Mia Mottley has announced a crackdown on the “misuse and abuse” of duty-free shopping and breaches of tax concession rules that have resulted in millions of dollars in revenue losses.

Delivering her 2023 Budgetary Proposals on Tuesday, she said the tax losses are unsustainable and there will be audits of the duty-free shopping sector and entities that benefit from concessions will be held to specific conditions, among other measures to address the situation.

She told Parliament that the Government is of the view that many of the concessions granted under the Duties, Taxes and Other Payments Order Chapter 67 (9b) should no longer be just a conferment but the “establishment of a contractual engagement”.

“You say you want a tax concession, you say you are going to provide ‘X’ jobs and ‘Y’ foreign exchange and ‘Z’ technical transfer know-how, well then stand by it,” she said.

“We cannot continue to have these tax concessions…being given as a conferment and people not necessarily adhering to the particular rules.”

Pointing to the misuse and abuse of duty-free procedures, the Prime Minister said that must also come to an end.

“Sales to bona fide travellers of alcohol and tobacco are controlled according to best practices, by delivery to the place of embarkation under Customs control. Other goods such as household appliances and clothing are sold directly to the customers from the shop, often without sufficient rigour in ensuring that the customer is not a resident or that the person is a bona fide tourist. There has been a deliberate disregard to the purchaser’s status,” the Prime Minister asserted.

“The truth is, you can’t live and let live all of the time. You have to start adhering to some of the rules. These situations create opportunities for significant revenue losses…. In 2018, tax expenditures constituted $769.9 million. In 2022, $753.9 million. It is simply unsustainable, and what it means is that too few people are left carrying the bag.”

Against this background, Mottley, who is also Minister of Finance, said several measures to remedy the situation will go into effect on April 1, 2023.

“All ministries and agencies with delegated authority to grant concessions in collaboration with Customs will conduct audits. This does not mean that we will not agree with the Barbados Hotel and Tourism Association (BHTA) to facilitate legitimate processing but that legitimate processing will still be subject to audits as will other government departments,” she said.

Beneficiaries of concessions will also have to be in compliance with the Barbados Revenue Authority (BRA), the National Insurance Scheme (NIS), the Corporate Affairs and Intellectual Property Office (CAIPO) and any relevant labour laws by the end of June this year.

(EJ)