80% of all-inclusive hotels are losing money says new study

The study of activities all inclusive hotel services revealed that over 80% of all-inclusive resorts have shown losses in their operations over the last five years, which in 2009 was RD $ 7,151.4 million (approx US$193 million).

The study carried out by the Economic Studies Department of the Dominican Internal Revenue (DGII) was an activity analysis of hotel services specifically under the 'all-Inclusive' resorts model in the Dominican Republic, including the fiscal contribution, jobs created, reported revenues and expenses and principal financial indicators.

So, says the study, the all-inclusive model shows a low contribution to internal revenue, especially in direct taxes such as Income Tax (ISR), which is due to low income compared to their expenses (costs).

"In financial terms the sector operates with low profitability, low liquidity and recurring losses mainly financed through debt outside the banking system," says the report. It also indicates that the model shows very little contribution to tax revenues with only 0.5% of total revenue from income tax in the last five years.

According to financial statements submitted to the DGII, available cash is not enough to cover the debt or interest and the model has a low level of assets and capital in relation to their liabilities.

"The existence of these losses continued in the majority of all-inclusive cases explains the low recovery of Income Tax and Effective Tax Rate (TET), defined as the ratio between taxes paid and revenue generated, which has not reached 1% in any of the years analyzed. The TET activity in 2005-2009 was 0.49%, 0.33%, 0.87%, 0.1% and 0.08% respectively. "

This report is available on the Internal Revenue's website at www.dgii.gov.do.

REASONS FOR REDUCED TAX CONTRIBUTIONS

CAUSES: The existence of incentive schemes that exempt the payment of taxes on hotels located in certain areas as specified by the Law 158-01 of Tourism Development and its subsequent amendments.

WAGES: The wages paid by the sector are mostly below the levels of scope for taxation of income tax of employees in the country.

LOSSES: All-inclusive hotels have been operating with high levels of losses during the period 2005 to 2009.

TAXES: Firms paid 26% (RD $ 644.2 million) on average per year. The remaining 74% (RD $ 1,859.3 million) were held by them but paid by employees and consumers.

Share this article

Digg it!

del.icio.us

MySpace

Facebook

Fark

Reddit

Newsvine