Antigua and Barbuda’s Prime Minister Gaston Browne has publicly questioned the fairness and effectiveness of the country’s existing Antigua and Barbuda Sales Tax (ABST) framework, flagging evidence that the current input-output tax mechanism allows large tourism businesses to recoup millions in public revenue at the state’s expense. During his weekly public radio address Saturday, Browne said he had directed senior finance ministry officials to launch an accelerated review of whether the ABST system aligns with the small island nation’s unique economic profile, and to explore potential alternative tax models that could shore up declining government revenues.
Browne’s criticism of the tax structure emerged during a wide-ranging discussion of the country’s key tourism sector, which forms the backbone of Antigua and Barbuda’s national economy. Under the current ABST rules, operating businesses can claim full tax credits for ABST paid on inputs including imported goods, operational supplies, and large capital investments, which they then use to offset the sales tax they collect directly from end consumers. Using hotels and resorts as a case in point, Browne explained that many large properties collect a 15% ABST from overnight guests, but amass such significant input tax credits through imported food, beverages, construction materials and other capital purchases that the government often ends up owing the businesses money instead of collecting revenue. He cited one example where a resort paid $20 million in ABST on imported goods, a sum that is fully offset against the tax the resort collected from guests — leaving the government with no net revenue from that portion of economic activity.
The prime minister argued that the current ABST framework, which was designed to work for economies with large domestic manufacturing sectors by incentivizing local input purchases, is fundamentally ill-suited to Antigua and Barbuda’s economy, which relies heavily on imported goods for its tourism sector. Worse, Browne noted, the current structure creates an unintended and harmful economic distortion: it actively discourages hotels and other businesses from purchasing locally produced goods, because importing supplies effectively allows them to bring those products into the country free of all taxes and duties, while domestic purchases would not deliver the same level of tax offsets.
To address these flaws, Browne has instructed finance officials to prioritize exploration of a shift to a simple flat sales tax, which would eliminate the expansive input tax credit system that allows large businesses to reclaim most or all of their collected tax. Under the proposed model, businesses would pay a single flat tax at one point in the supply chain, removing the current scope for large-scale tax offsets that erode public revenue. Browne stressed that any reform would need to be carefully designed to avoid the risk of double taxation, a key pitfall that policymakers must guard against to prevent unfair tax burdens on businesses and consumers along the supply chain. He clarified that no final policy decision has been made, and the current review remains in the exploratory phase.
During the radio address, Browne also suggested that policymakers may need to consider a sector-specific approach to taxation, arguing that international-facing hotels operate with a very different business model than domestic wholesalers and retailers, and the current one-size-fits-all structure fails to account for these structural differences. As a major source of public revenue for Antigua and Barbuda, any substantive change to the ABST system will require extensive consultation with private sector stakeholders and will almost certainly require legislative approval before any new framework can be implemented. Finance officials are expected to complete their review and submit policy recommendations that balance the government’s goal of boosting revenue with the need to maintain a fair and predictable tax environment for local businesses.