New Year Brings Triple Whammy for Island Businesses
Tax Hikes, Booze Ban Slam Island Economy

March 13th, 2014

Bay Islands businesses were hit with a Tegucigalpa Trifecta to open 2014.

First, as part of a package of budget austerity measures (paquetazo) passed by the outgoing Congress in late December, the sales tax was increased to 15 percent from 12 percent, effective January 1. Second, the same paquetazo once again eliminated duty and tax exemptions authorized for island businesses under the ZOLITUR (tourism free zone) law, continuing the seesaw ride ZOLITUR beneficiaries have been on since 2012. As if that were not enough, shortly after the new government of President Juan Orlando Hernandez assumed power in late January, Congress decreed that alcohol would no longer be sold anywhere in Honduras after 5 p.m. on Sundays, beginning February 23.

William Brown, bartender at Coconut Tree in Roatan's West End, adds up tabs on the first night of Honduras's new Sunday "dry law."

William Brown, bartender at Coconut Tree in Roatan’s West End, adds up tabs on the first night of Honduras’s new Sunday “dry law.”

Of the three, only the withdrawal of ZOLITUR benefits was specifically targeted at the Bay Islands. When former President Manuel Zelaya signed the legislation into law on Roatan in 2008, he declared that Bay Islanders would never pay taxes again. But the benefits, always complicated to claim, were suspended for much of 2013 as a presidential commission reviewed all Honduran tax exemptions. By mid-year some beneficiaries were once again receiving dispensas to import duty-free, and then Roatan Mayor Julio Galindo was optimistic the benefits would be restored with minimal changes. But the paquetazo set things back to square one again.

“It’s eating up our high season,” said Victor Moncada, communications director for ZOLITUR. He said the suspension was “premature” and was done without proper analysis. “There’s a whole bunch of people that have not been able to import their products to be used in high season because of this.”

Moncada said Jerry Hynds, the Bay Islands representative in the National Congress, and the mayors of the Bay Islands municipalities were lobbying in the capital for a modification to the paquetazo that would restore ZOLITUR benefits. He said a decision, “whether positive or negative,” would be made by the end of March.

Meanwhile, he said, the ZOLITUR secretariat in French Harbour continued to function uninterrupted, although staff missed a couple of paychecks in January. Revenue from cruise ship passengers and other fees continues to flow in to fund projects for the Bay Islands. In particular, he said, construction of the Utila pier was continuing, the new police station for Oak Ridge had just been completed, work was beginning on a new security strategy for the Bay Islands, the land-management plan for the islands was expected to be ready in April and demarcation of protected areas within the Bay Islands National Marine Park was “on its way.”

Moncada said the paquetazo was also impeding efforts of non-profit groups to better the lives of Bay Islanders, since there was no provision for them to continue importing donated items duty-free.

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