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This paper attempts to analyse the impact of the three-year old value-added tax (VAT) on the tourism sector in Barbados. The results show that on average the VAT has been passed on to the tourist in the form of higher hotel room rates. This may be due to the fact that while the VAT on hotel accommodation was levied at 7.5% as opposed to 15% imposed on most other goods and services, this concession represents a 50% increase from the previous 5% sales tax. Thus hoteliers, who prior to the VAT are already less competitive than their Caribbean counterparts, are now more disadvantaged by this new tax policy. The paper therefore calls for Government to recognise the fragility of the tourism sector and strive towards implementing policies that will enhance the industry's future competitiveness.