Over the next 43 days, government plans to continue implementing a raft of new tax measures designed to bill tourists and expatriates for visiting and working in the Virgin Islands.

In a pair of announcements published near the end of last week, government announced that heftier cruising permit fees and a new tourism and environmental levy will take effect on Aug. 1 and Sept. 1, respectively.

Those two taxes, which target visitors, come on the heels of this month’s work permit fee restructuring, which dramatically increased Labour Department costs for the territory’s higher-earning expatriates.

Such measures represent part of lawmakers’ efforts to diversify income sources in the wake of a difficult year for the territory’s financial services industry, which in recent months has seen 14-year lows in new company incorporations.

Financial services have long been a breadwinning industry in the VI, typically accounting for about 60 percent of government’s yearly revenue.

Lawmakers hope the new levies, which update decades-old fee schedules and direct funding toward targeted goals like conservation, can trickle some much-needed revenue into government’s coffers.

Some professionals they affect, however, argue that the taxes have been rushed without sufficiently thorough consideration of their implications.

Cruising permits

Currently, cruising fees are mandated by the 1976 Cruising Permit Ordinance. The law charges $0.75 per person per day for VI-based charter and bare boats from May through November; $2 per person per day for such vessels from December through April; and $4 per person per day for foreign boats year-round.

The 2017 Cruising Permit Amendment Act — passed in the House of Assembly on June 6 and signed by the governor on June 13 — raises those fees to $6 per person per day for home-based charter boats and $16 per person per day for foreign vessels year-round.

Industry professionals, while not entirely opposed to the fee increase, have protested its Aug. 1 implementation date.

“It’s too short of notice,” said Peter Twist, director of the BVI Marine Association and an owner of the VI-based Conch Charters.

Mr. Twist argued that the fees should be applied at the beginning of the new tourist season — not in the middle of slow season — to give charter operators the chance to include the additional fees in their packages.

Due to the rushed timeline, crewed yacht operators will swallow a large expense, according to Janet Oliver, executive director of the Charter Yacht Society.

“Because crewed yachts are offered as ‘all-inclusive,’ the cruising permit fee is not passed on to the guest — rather, it is absorbed by the yacht,” she wrote in an e-mail to the Beacon. “A typical, locally based, eight-passenger crewed charter yacht on a one-week charter will pay an additional $174, whilst an eight-passenger, foreign-based charter boat will pay an additional $576 assuming they only spend six days in the BVI.”

Charter yachts typically book three to six months in advance, Ms. Oliver added.

“Whilst the charter industry knew the effective date of the fee increase was imminent, it did not expect it to be implemented mid-season,” she wrote. “I think the industry was expecting the increase to take place at the beginning of the 2017/2018 season, which is Dec. 1.”

Eco-levy

Government also plans to introduce an entirely new tax: a $10 environmental levy for most visitors arriving by boat or plane.

Earnings from the fees — which exempt yacht crews, Her Majesty’s ships of war, “pleasure yachts,” visitors under the age of 2, and other government or judicial visitors — will be directed towards various climate change, environmental protection, and tourism initiatives.

“Pleasure yachts” likely refer to recreational vessels not used for commercial purposes, according to Ms. Oliver.

“It seems unusual that visitors arriving in the territory by plane or charter boat will be expected to pay the tax, but visitors arriving on a ‘pleasure yacht’ will not be expected to pay,” she wrote in an e-mail.

Lawmakers unanimously passed the levy on April 18, and the governor signed the bill on June 9.

“It has become very evident to us that if we are going to have sustainable tourism, we’ve got to protect the environment,” Deputy Premier Dr. Kedrick Pickering said in April while seconding a motion for the second reading of the bill. “In our budgetary allocations, more often than not, the environment is not one of our higher priorities in terms of the daily needs of our people.”

Dr. Pickering, who also serves as the minister of natural resources and labour, pointed to the levy as a good way to rectify that by asking tourists to help preserve the environment they get to visit.

Ms. Oliver, however, expressed worry over the fee’s potential impact on tourism, especially when combined with the $20 departure tax visitors have to pay when leaving.

“No matter how well-intentioned the tax, charging our visitors as they arrive and charging them as they depart does not send the most welcoming message to them,” she wrote.

The legislation’s final draft — Gazetted on June 12 — apportions 40 percent of the tax’s revenue towards the environment and climate change; 40 percent towards the maintenance and development of tourist sites and activities; and 20 percent towards the “marketing of the territory as a premier tourist destination.”

The bill’s implementation comes after a long history of unfulfilled promises. The tax was listed as a planned revenue-generating initiative in the last four Medium-Term Fiscal Plans, as well as the 2013 budget report.

Last year, the levy was slated to raise $1.9 million for the government but was never implemented. The 2017-2019 MTFP projects that it will raise $1.5 million in each of the next three years.

Work permits

Dr. Pickering (R-D7) also told the Beacon last week that the new work permit system was implemented as scheduled, despite Labour officials who had said otherwise.

Several government announcements — and a Gazetted order — indicated that the new work permit fee structure would take effect on July 1, though Labour employees told this reporter on July 3 and 5 that the department had not yet begun charging people in accordance with the new system.

Last week, however, Dr. Pickering reiterated his previous announcements.

“The new fees were effective [July 1],” he said on July 11. “I think what was happening is there is a certain amount of administrative adjustments that had to be made, and they were working on implementing those. In terms of the actual policy itself, that was the first of July.”

A Labour official — who did not identify herself — confirmed over the phone on Tuesday that the agency is now utilising the new framework.

Work permit fees had been set by the 2005 Statutory Rates, Fees and Charges Act, which goes off of 1981 legislation that established a relatively straightforward sliding scale based on salary.

For example, employees earning between $15,000 and $20,000 were charged $500 annually, employees earning between $20,000 and $25,000 were charged $600, and employees who make more than $25,000 were charged $1,000. Workers were and are also currently charged $75 for the permit card itself.

Under the new structure, expatriates are charged three percent of their earnings up to $25,000, five percent of any earnings beyond $25,000, and seven percent of any earnings beyond $50,000.

For example, someone who earned $150,000 is charged three percent of their first $25,000, five percent of their second $25,000, and seven percent of their last $100,000, looking like this: $750 + $1,250 + $7000 = $9,000.

The new system also charges employees an additional $50 for an application fee.

Work permit costs are capped at $10,000 regardless of income.

Private sector worries

After Dr. Pickering initially outlined the work permit system during an HOA sitting in late April, some businesses expressed concerns.

“Especially for companies in the creative and marketing fields, you’ll see a much higher increase in outsourced business,” said Nick Cunha, creative director at aLookingGlass, in May. “That long-term hurts the BVI.”

Alred Frett, managing director at B&F Medical Complex Limited, criticised the government for what he perceived as an attack on local businesses.

“Firstly, all BVI stakeholders should realise that, directly or indirectly, it is local businesses that will be called on to pay these work permit fees,” he wrote in a May statement.

Dr. Pickering acknowledged such concerns in a May 23 press release.

“We have had representation from several of the major businesses ask us to reconsider the timing,” he said in that release. “None of the businesses objected to the work permit increases, but two of their primary concerns were one, the timing, because we are almost in the middle of the financial year. The second point that we have been asked to reconsider is the percentage of some of the increases.”

 However, no changes were made to the system that is now implemented.

“[The business community’s concerns] were taken into account,” the deputy premier said last week when asked about the lack of changes. “But the decision was taken to let the fees remain what we originally said.”

Dr. Pickering added that employees and employers would be able to work out individual payment plans for work permit renewals with the Labour Department if necessary.

“Individuals have the right to go to a government department and institute a payment plan,” he explained.

The deputy premier added that he was not sure if such a plan could be used for newly arriving workers.

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