Barbadians are heavily taxed! Most taxpayers do not mind paying their fair share of taxes once they can reap the social benefits and enjoy a decent standard of living. Additionally, the introduction of levies that go towards a national good can be appreciated. The Queen Elizabeth Hospital levy, the Garbage & Sewage tax and the most recent Resilience & Regeneration levy added to national insurance payments, are some examples of taxpayers contributing to the national good.
The problem emerges when the services at the QEH have not improved, evidence in the plethora of complaints daily on the call-in programmes and the anecdotal evidence from citizens on a weekly basis. The lack of improvement in the garbage collection around the country – in preparing this article there are communities in rural parishes that have not had a garbage collection in three weeks. But not to digress.
Of late the consistent imposition of levies, has become overbearing with many Barbadians complaining and justifiably so, about the current tax regime. It is ironic that the InterAmerican Development Bank’s 2025 – 2030 Country Strategy proffered that private domestic and foreign investment is challenged by several hurdles, including “a burdensome tax structure”.
This is why the introduction of a rental car levy which does not only penalise visitors but locals alike, is difficult the comprehend. From this month, Government is moving forward with the Car Rental Levy, originally scheduled for 1 October 2025, and now expected to be implemented by 15 October 2025. This levy will replace the visitor permit and will charge BBD$5 per day for a maximum of seven days, adding up to BBD$35 per rental. While this levy is a sector-specific tourism charge, targeting only vehicle rentals rather than general tourism spend, it still represents a disproportionate hit to smaller operators, many of whom are already struggling to recover from the economic pressures of the COVID-19 pandemic.
For some time, Governments have sought to tax heavily the tourism sector, which has been touted as the ‘cash cow’ for the economy. This however has been buttressed by the provision of several incentives for major tourism players to balance any increases in operating costs.
Large operators including international hotel chains, resort groups, etc., can absorb the cost of a modest levy across multiple revenue streams. Their pricing structures are more flexible, allowing them to fold the levy into room rates without significantly affecting demand. They may also benefit from greater economies of scale and marketing reach, insulating them from marginal increases in cost. These large players already benefit from a range of concessions under the Tourism Development Act and related investment legislation. These include duty-free concessions, tax rebates, and other incentives that reduce their operating costs. A major resort can absorb or redirect costs because it has multiple revenue streams: rooms, restaurants, spa services, golf courses, events, and tour commissions. A small car rental operator has none of that.
The problem is that small rental firms operate with tighter margins and less pricing power. A levy that adds even a small percentage to their costs can erode profitability. They are often more vulnerable to shifts in visitor behaviour, such as tourists opting for bigger brands with bundled rates or more perceived value. These small businesses are also challenged from the underground economy – those individuals who are not legally registered, do not pay their taxes but provide vehicle rentals to locals and sometime visitors, at prices net of any taxes or levies.
Imagine a modest car rental business based in St. Philip, with ten vehicles primarily serving budget-conscious returning nationals and mid-range tourists. A five-day rental now carries a BBD$25 levy. If the operator’s net profit per booking was previously BBD$40, the levy wipes out more than half of that margin. A price increase risks losing those customers altogether. Meanwhile, a large resort with hundreds of guests and in-house luxury amenities, remains untouched by this levy.
Any economist worth they salt will argue that revenue generated by smaller players like the Airbnb, rentals firms and the like, will contribute directly to the economy as these transactions circulate in real time in the economy. Persons are employed, products and services are procured and yes, taxes are paid, faster. This is why it makes good economics and even political sense by an administration to insulate smaller players since they are not benefiting from incentives and concessions and have the potential to contribute more directly to economic growth.
Global research, including reviews commissioned by the Welsh Government, shows that the impact of a tourism levy depends on its structure. Flat per-day taxes without exemptions or tiering tend to hit small, locally owned operators hardest. Why?
- Smaller companies cannot spread costs across large volumes.
- Larger firms can use tax concessions or pricing power.
- Flat-rate levies take a bigger percentage bite from smaller margins.
- Customers are more price sensitive at the lower end of the market.
This is why many jurisdictions exempt or scale down levies for micro and small businesses to protect their competitiveness.
International experience also shows that transparent use of levy revenue builds trust. Several countries in Europe use income from levies to support infrastructure, conservation, and marketing, all clearly reported. Levy allocations are published annually in municipal budgets.
By contrast, in Barbados, there has been no clear commitment on how revenues from the Car Rental Levy will be allocated or reported. This lack of clarity creates understandable concern, as businesses are wary of measures that take without showing tangible return.
This isn’t just an accounting issue. Over time, the cumulative pressure on small operators can push them out of the market, allowing larger, well-capitalised players to consolidate even more control over the tourism economy. The end result? Less local ownership, reduced community benefit, and a less inclusive tourism sector.
