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Opinion| The Trade License Regime: A ‘tax’ by any other name

Updated: May 21, 2022

Contributed by the Belize Chamber of Commerce & Industry

The mere fact that something is labeled a ‘fee for services’ does not necessarily preclude it from being a tax. In other words, an imposition that must be paid, whether or not the relevant services are acquired and that has no discernible relationship to the value of the services, is unlikely to escape characterization as a tax. … The High Court held that for a ‘charge’ to be considered a ‘fee for services, it must be ‘exacted for particular identified services provided or rendered individually to, or at the request or direction of, the particular person required to make the payment”—Justice Michelle Gordon (2012).

The opening quote from Justice Gordon, writing in the Melbourne University Law Review, draws a distinction between a “fee” and a “tax.” Gordon articulated a commonly held position among legal and financial minds: That a fee is charged “for ... services provided or rendered individually to…the particular person required to make the payment.” There is a type of proportionality that is inherent in a “fee”—That is, you get exactly what you pay for.

A tax, on the other hand, is viewed more generally and for general-revenue purposes. Gordon (2012) phrases it this way: “An imposition that must be paid, whether or not the relevant services are acquired and that has no discernible relationship to the value of the services, is unlikely to escape characterization as a tax.

Put simply, the weaker the linkage between the “charge” (regardless if is nominally called a ‘fee’) and the services rendered, the more likely it is we are dealing with a tax by design. This is especially true when the imposition is clearly for general-revenue purposes.

General Revenue Purposes

It is no secret that the Trade License Regime—a vestige of Belize's colonial past—has become a significant (albeit disconcerting) source of “revenue” for the nine municipalities; namely, Belize City, Belmopan, Dangriga, Punta Gorda, San Pedro, Corozal Town, Orange Walk Town, San Ignacio/Santa Elena, and Benque Viejo.

Excerpt from Belize City's audited financials for 2019

For example, in Belize City, the Trade License “fee” (“TL fee”) generated $4.3 million, a figure that accounts for roughly 18% of the council’s total recurrent revenues (Belize Council’s Financial Report, 2020). A year earlier—in pre-COVID times—CitCo’s audited financials for 2019 placed the “fee” at $5.4 million, which represented 21% of the council’s total recurrent revenue for that year.

It might surprise a few, but the TL fee far outstrips even the contribution from liquor licensing fees (plural given the different types of liquor licenses). In 2019, CitCo’s financial report informs that liquor licenses generated just above $500,000, or only about 2% of total recurrent revenue. That is, however, to be expected considering how and on whom the Trade Licensing regime is applied.

Under the current law, the TL fee is charged as a percent (25% by law) of a business’s annual (rental) value (ARV). Consequently, if a business has an ARV of $30,000, the strict application of the Trade Licensing Act—as it currently stands—would imply a “fee” of $7500. For a business with an ARV of $50,000, the charge would be $12,500.

Property-Tax by Design

Now, you may be sitting there reading this article and asking yourself: “But doesn’t a charge based on annual rental value sound awfully similar to a property-tax valuation methodology?” The short answer to your question would be a resounding “Yes!” Look up “Annual Rental Value” online and you are likely to find statements like this one:

Annual rental value-based property tax systems tend to be originally based on the British rating system and are most commonly found in the former British colonies.

At this point, you may ask another naturally following question: “But wait! Don’t the municipalities already have revenues flowing from property taxes?”

At this point, you’d be on a roll, because you would be right, yet again! Keeping with the Belize City Council’s financials, the 2019 report shows that property taxation provided close to $9.1 million (or 35% of CitCo’s total revenues). This property tax, however, is based on Market Value (i.e. how much the property could be sold for) as opposed to ARV (how much it could reasonably be rented for).

International Best Practices for Fees

Having briefly summarized that status quo, it becomes useful to outline a few of the international best practices as far as “fees” are concerned.

First, international best practices have repeatedly advised that licensing fees—if we accept that any should be instituted at all—should be only sufficient to cover administrative costs. More precisely, the benchmark calls for such charges to be flat fees, and thus, ought not to serve as a means of generating revenues for the (local) government.

Second, business activities produce net-positive social benefits, and as such ought not to be subjected to duty just in order “to establish and operate.” The duty or fee, therefore, should be for a legitimate public-interest purpose such as public safety and health. For this reason, one could appreciate the role of the liquor licensing regime.

It is worth noting that the liquor licensing regime, as instituted under the Intoxicating Liquor Licensing Act’s section 3, actually operates more appropriately as an actual fee system.

For instance, the law sets a fee of $750 for the “restaurant (liquor) license” for any restaurant operating in urban areas. If you are a restaurant with a single bar—regardless of the size of the physical location—the fee (under the Act) is set. For a nightclub, the liquor license is $3,000. Both examples are more consistent with international best practices.

That said, here’s an intriguing sidebar observation. In many instances, the flat-fee design of the liquor licensing regime makes obtaining a license to sell alcohol cheaper than the license to simply start a business.

In Belize City, for instance, the average TL fee is about $1,900, and it ranges from as low as $25 to as high as more than $100,000. There are close to 300 companies in Belize City that pay a TL “fee” of more than $3,000—that is, more than the nightclub (liquor) license fee.

That “sidebar” observation (pun intended) raises some interesting policy questions. Alcohol is largely recognized for its harmful societal impacts. On the other hand, non-liquor-related business activities (e.g. Business Processing Outsourcing centers, law firms, convenience stores, gyms, food vendors, bakeries, and so on) are SUPPOSEDLY welcome additions to communities.

If the latter is true, then one—from a public-policy vantage point—would have to justify how it is possible to have TL fees for simply starting a business being higher than the fee to obtain a liquor license, for instance. This inadvertently sends mixed signals.


In this Business Perspective Column, we opted to lay out the general backdrop for this ongoing Trade Licensing discussion. In the second part of this piece which will be published next week, we will—with this background in mind—layout the Belize Chamber of Commerce and Industry’s position as it pertains to the proposed amendments to the regime.


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