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Thursday, June 15, 2017

The tourism tax is one tax too many

A new tax is to be introduced beginning July 1, 2017; tourism tax. Depending on the rating of the hotel, the tax will range from RM2.50 – RM20 per night.
The question on everyone’s mind is why is there a need to collect more taxes from consumers?
I go back to 2015 when GST was implemented and consumers were assured at that time, that once GST is implemented, there will be no other tax/charges that consumers will have to pay.
Two years on, we are now having the tourism tax. However, one must not forget that hotels and restaurants have been collecting what is referred to as service charge for some 50 years and continue to do so.
In Malacca, there is a heritage charge of RM2 per room per night. Penang has a local government fee that hotel guests pay which ranges from RM2 – RM3 per night.
In Langkawi, there is a tourism promotion fee ranging from RM1 - RM9 per night depending on the rating of the hotel as well.
Now the ministry of tourism intends to implement the tourism tax across the country. Now, where is this going to end? What is there to stop other states from implementing their own tourism-related fees as in the case of Malacca, Penang, and Langkawi?
I was privy to be involved with the heritage charge proposal in Malacca where the state government wanted to impose a 5% charge for accommodation per night.
However, after several discussion with the state government including the then chief minister, it was agreed that there will be a flat rate of RM2 per night.
The amount collected would go towards the promotion of tourism in the state and also given to hotel- and tourism-related associations for training initiatives.
Part of the justification reported in the media is that the Ministry of Tourism, Arts and Culture (Motac) need more funds since the allocation for the ministry has been reduced.
This is to be used for promotion and upkeeping of tourist attractions among others. I am sorry but I think that the ministry needs to look at other avenues instead of taking the easy way out and passing it on to the end user.
I would expect if the guests are going to pay any sort of fee, it should be in return for products and services and not for the ministry to spend as and how they please.
Let me share my experience of Switzerland where I studied and have also visited a few times recently on how they address the Tourist Tax as they call it.
It is something like SF3.50 per night per person. The total amount collected is split between the state and the local tourism authority. In addition as a tourist who pays the tax, one will be issued a tourist card of some sort which entitles the guest to use the bus, tram and in some cases trains, and funicular at no charge.
In addition, this tourist card also entitles the guest to discounted rates where he or she need to pay an entry fee to tourist attractions and discounts at restaurants etc.
The savings I made in using this card was far more than the SF3.50 I paid per night and as such tourists also benefit in return.
I wonder whether there is any such benefit to those who pay the Tourism Tax in Malaysia or are there plans to do so?
Having said that this, the entire tax should be revisited and serious consideration should be given if there is a need for this to be implemented.
There is also the issue about unregistered hotels that are not subject to this tax as it is only applicable to registered hotels. Based on data available, there currently 3126 hotels that are registered with Motac, 6542 unregistered accommodation providers, and a further 11698 providers through Air BnB (source: Malaysian Association of Hotels (MAH).
How is this going to be addressed, as it will be unfair that only hotels that are registered and legal are subject to collection of the tourism tax? For some reason, when one tries to operate a legitimate business, he or she ends up being regularised more and more in addition to paying more taxes.

Since hotels seem to be a very convenient avenue for the collection of taxes, my suggestions is that in order not to burden the consumer further, hotels are exempted from GST for accommodation and that can be replaced with the tourism tax.
They can still continue to collect GST for food and beverage and other services that are provided except for accommodation. Since hotels are the only ones that are required to collect Tourism Tax, but the whole country and other businesses benefit from this tax, then hotels must be given some incentive as well. I am sure that hotel operators would agree to the tourism tax replacing the GST and so will consumers.

Shopping malls, tourist attractions, and transport services are just some of the few that benefit from visitors.
Since we are at it, why not introduce Tourism Tax for hospitals as well since they also benefit from medical tourism?

Look at our closest neighbours, Singapore. They do not have such a tax. Thailand neither. So why is Malaysia introducing it? Sarawak has already expressed its concerns about the tax as reported in the media and Sabah intends to discuss the same issue at their cabinet meeting this week.

In closing, I think it would be best to defer the implementation of the Tourist Tax until further notice. All stakeholders must be consulted and a decision must be made for the benefit of the industry as a whole.

Reginald T Pereira is the President and CEO of Aariana Hospitality International- Mkini

1 comment:

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