LISTEN: PM Browne Questions ABST Structure, Calls for Review of The System

Prime Minister Gaston Browne has raised concerns about the structure of Antigua and Barbuda’s ABST system, arguing that the current arrangement may be allowing some businesses, particularly hotels, to reclaim significant amounts of tax while reducing government revenues.

Speaking on his weekly radio programme on Saturday, Browne said he has instructed finance officials to examine whether the existing system remains appropriate for the country’s economy and to explore possible alternatives.

The discussion arose during a conversation about the tourism sector, where Browne said some hotels are able to offset large amounts of Antigua and Barbuda Sales Tax (ABST) through the current input-output mechanism.

“One thing I wasn’t too happy with is the ABST and the structure of it,” Browne said.

The prime minister explained that under the current system, businesses can claim credits for ABST paid on goods and services purchased for their operations, offsetting taxes collected from customers.

Using the hotel sector as an example, Browne said a resort may collect millions of dollars in ABST from guests but could also accumulate substantial tax credits through imported goods, food, beverages and capital investments.

“They may charge the guests the 14 percent,” Browne said. “But then all the goods that they import into the country, all the food, the beverage, even the capital purchases, if they paid $20 million in ABST, then it is set off and we owe them.”

The prime minister suggested that the system may not be delivering the best results for Antigua and Barbuda because the country does not have a large manufacturing sector.

“I don’t think it works well for us,” Browne said. “It works well for countries that have a large manufacturing base because you’re trying to incentivize domestic purchases.”

According to Browne, the ability of some businesses to reclaim taxes paid on imports may create unintended consequences and may even discourage the purchase of locally produced goods.

“As it stands now, having an ABST in which they’re able to claw back, it is actually a disincentive for them to buy local because technically speaking, they’re importing their products free of all duties and taxes,” he said.

The prime minister said he has asked officials within the Ministry of Finance to accelerate a review of the tax structure.

“I’ve asked finance officials to expedite looking at the possibility of replacing the ABST with just a flat sales tax,” Browne said.

Under such a model, businesses would pay a single sales tax without the same level of tax offsets currently available under the input-output system.

Browne acknowledged that any change would need to be carefully structured to avoid double taxation and ensure businesses are not taxed multiple times throughout the supply chain.

“The only thing we have to structure it in such a way to make sure there’s no duplication,” he said. “So you don’t pay at the port and then the retailer pays again.”

The prime minister stressed that no final decision has been made and that the review remains at an exploratory stage.

During the discussion, Browne also suggested that policymakers may need to examine whether different sectors should be treated differently under the tax system.

He argued that hotels serving international visitors operate differently from domestic wholesalers and retailers and that the current structure may not adequately account for those distinctions.

Finance officials are expected to study the issue further and provide recommendations on whether changes to the ABST regime could improve government revenues while maintaining fairness for businesses.

The Antigua and Barbuda Sales Tax currently serves as one of the government’s primary sources of revenue and applies to a wide range of goods and services throughout the economy.

Any changes to the system would likely require extensive consultation with the private sector and could result in legislative amendments before implementation.

Source: Prime Minister Gaston Browne on the Browne and Browne Show.

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