A mat­ter of tax

Tourism play­ers in the coun­try weigh in on the Tourism Tax that is set to be im­ple­mented next month.

The Star Malaysia - Star2 - - Travel - By CH­ESTER CHIN star2­travel@thes­tar.com.my

THE statis­tics on Tourism Malaysia’s web­site tell a re­as­sur­ing story. Tourist re­ceipts amounted to RM82.1bil last year, which is an 18.8% growth from RM69.1bil in 2015. Also, tourist ar­rivals last year stood at 26.76 mil­lion, a 4% in­crease from the pre­vi­ous year.

A re­port by the World Tourism & Travel Coun­cil, mean­while, fore­casts the to­tal con­tri­bu­tion of travel and tourism to the coun­try’s GDP to rise by 4.2% this year.

The Tourism Tax (TTx) – to be im­ple­mented on July 1 this year, in­stead of the pre­vi­ously re­ported Aug 1 – is set to pro­vide a sus­tain­able fund for the de­vel­op­ment of our tourism in­dus­try.

Tourism and Cul­ture Min­is­ter Datuk Seri Nazri Aziz re­port­edly said po­ten­tial rev­enue from the new tax would be around RM654mil, if an oc­cu­pancy rate of 60% can be achieved for the 11 mil­lion “room nights” avail­able in the coun­try. A higher oc­cu­pancy rate of 80% will boost col­lec­tions to RM872.8mil.

TTx, passed as part of the Tourism Tax Bill 2017, will see lo­cal and in­ter­na­tional tourists pay­ing a levy to the op­er­a­tors of ac­com­mo­da­tion premises on a per-room, per-night ba­sis.

The rates are RM20 for five-star ac­com­mo­da­tions, RM10 for fourstar ac­com­mo­da­tions, RM5 for one- to three-star ac­com­mo­da­tions, and RM2.50 for non-rated ac­com­mo­da­tions, in­clud­ing bud­get ho­tels. It was re­cently re­ported, how­ever, that the govern­ment may ex­empt the TTx on three-star ho­tels and be­low for lo­cals.

The TTx will not ap­ply to home­s­tays, kam­pung stays, premises main­tained by religious in­sti­tu­tions for non-com­mer­cial pur­poses, premises op­er­ated by Fed­eral and state govern­ment for non-com­mer­cial pur­poses, and premises with fewer than 10 rooms.

Ho­tels as ‘tax col­lec­tors’

While the tax ul­ti­mately ben­e­fits the lo­cal tourism in­dus­try, it has put ho­tel op­er­a­tors in the po­si­tion of “tax col­lec­tors”. At least, that’s how Malaysian As­so­ci­a­tion of Ho­tels (MAH) pres­i­dent Sam Cheah Swee Hee views it.

“The cur­rent model of the tourism tax un­fairly places the bur­den of col­lect­ing the tax on reg­is­tered ho­tels who are re­spon­si­ble for col­lect­ing and pay­ing this to the govern­ment,” he said.

Ho­tel op­er­a­tors reg­is­tered with the Tourism and Cul­ture Min­istry (Mo­tac) are au­to­mat­i­cally in­cluded in the new tax’s scope. But Cheah pointed out that fewer than 15% of ac­com­mo­da­tion providers in Malaysia are reg­is­tered with the min­istry.

“In terms of num­bers, there are 3,126 ac­com­mo­da­tion providers that are reg­is­tered with Mo­tac. How­ever, there are 9,578 ac­com­mo­da­tion providers listed on the ho­tel book­ing site Agoda.com and a fur­ther 11,698 ac­com­mo­da­tion providers listed on Airbnb,” he il­lus­trated in a state­ment.

Data from MAH stated there are 6,452 un­reg­is­tered ho­tel providers and a fur­ther 11,698 op­er­a­tors who pro­vide ac­com­mo­da­tion through Airbnb.

The vast num­ber of un­reg­is­tered providers, Cheah reck­oned, would re­quire a sig­nif­i­cant amount of re­sources on the part of the Royal Malaysian Cus­toms Depart­ment (RMCD) to iden­tify.

Per­suad­ing un­reg­is­tered op­er­a­tors to reg­is­ter is an­other chal­lenge, said Malaysian As­so­ci­a­tion of Ho­tel Own­ers pres­i­dent Tan Sri Teo Chi­ang Hong.

The high com­pli­ance re­quire­ment, ac­cord­ing to him, will hin­der un­reg­is­tered op­er­a­tors from reg­is­ter­ing. This, he said, would con­tinue to “en­cour­age the gap that ex­ists be­tween those op­er­at­ing in the sys­tem and those outside of it”.

A tax­ing is­sue

Teo said re­cent years have seen most ho­tels in our coun­try achiev­ing 35% to 40% oc­cu­pancy rate – well be­low the pro­jected 60% mark sug­gested by the min­is­ter. TTx, he said, is likely to fur­ther push down the num­bers.

“It could en­cour­age more tourists to book with un­reg­is­tered and un­li­censed ho­tels due to the lower costs,” he said, adding that a po­ten­tial loop­hole ex­ists whereby ho­tels can change their rat­ing or op­er­at­ing model. Those ac­tions would re­sult in lower tax rev­enues for the govern­ment.

Malaysia Bud­get Ho­tel As­so­ci­a­tion pres­i­dent P.K. Leong said Mo­tac held a meet­ing in Ke­lan­tan re­cently to in­form in­dus­try play­ers of the im­ple­men­ta­tion of the tax. How­ever, no proper dis­cus­sion took place be­tween both par­ties. Leong said there is no trans­parency re­gard­ing how the funds col­lected will be chan­nelled back to the in­dus­try.

“But since the money is col­lected by ho­tel op­er­a­tors, it should be used to im­prove the hos­pi­tal­ity sec­tor here,” he said.

Based on the direc­tive from RMCD, Leong also de­duced that Airbnb op­er­a­tors will be ex­empted.

“On av­er­age, those who op­er­ate Airbnb prop­er­ties only have two rooms. Thus, they are able to en­joy ex­emp­tion un­der the tax, which ex­empts ac­com­mo­da­tion with less than 10 rooms,” he said.

In an e-mail, Airbnb told Star2 the com­pany is hav­ing dis­cus­sions with Malaysian au­thor­i­ties to “reach a fair agree­ment around the Tourism Tax”.

“Airbnb wants to pay taxes, and we’ve part­nered with gov­ern­ments in over 275 ju­ris­dic­tions all over the world to make it eas­ier for our hosts and guests to pay their fair share,” it said.

As of May 1 this year, the com­pany has paid over US$240mil (RM1.02bil) in ho­tel and tourist taxes around the world.

“We’re con­tin­u­ously work­ing with gov­ern­ments and pol­i­cy­mak­ers around the world to ex­pand our pro­gramme and find a proper way to col­lect fair tax rev­enue from our host com­mu­nity – and Malaysia is no ex­cep­tion,” it said.

Sin­gle tax­a­tion sys­tem

Some states have im­ple­mented their own tourism charges. These are the Her­itage Tax in Me­laka, Lo­cal Govern­ment Fee in Pe­nang, Tourism Pro­mo­tion Fee in Langkawi, and Lo­cal Govern­ment Fees/City Tax in Kota Baru, Ke­lan­tan.

How­ever, Nazri was re­ported as say­ing, on June 13, that the states would be asked to stop col­lec­tion of their ac­com­mo­da­tion-based charges once TTx comes into ef­fect.

On that note, Cheah said hote­liers don’t com­pletely op­pose TTx as the in­dus­try can ben­e­fit from a more sus­tain­able fund. How­ever, there are ways to make it less tax­ing for con­sumers.

“Don’t charge per night, but im­pose a one-off pay­ment in­stead. Also, don’t tax the lo­cals,” he said, adding that an elec­tronic sys­tem can be put in place to col­lect TTx from for­eign tourists when they go through im­mi­gra­tion.

That call to ex­empt lo­cals from TTx is echoed by Malaysian As­so­ci­a­tion of Tour and Travel Agents (Matta) in­bound vice-pres­i­dent Datuk K.L. Tan.

“Lo­cal Malaysian busi­nesses and leisure trav­ellers are al­ready pay­ing for GST and in­come taxes. Sub­ject­ing them to new taxes is of con­cern,” he said.

Ac­cord­ing to Tan, the ma­jor­ity of do­mes­tic trav­ellers travel for busi­ness and other pur­poses, such as fam­ily obli­ga­tions, med­i­cal treat­ment, ed­u­ca­tion and religious pur­suits.

“These are es­sen­tial trav­ellers and not tourists, in essence,” he said, adding that most lo­cals don’t nec­es­sar­ily travel for plea­sure as the def­i­ni­tion of a “tourist” might sug­gest.

Tan said de­fer­ment is key to im­ple­ment­ing TTx ef­fec­tively and ef­fi­ciently.

“The tourism and hos­pi­tal­ity in­dus­try has been given sig­nif­i­cant at­ten­tion as it is known to be the dom­i­nant for­eign ex­change rev­enue earner and ‘saviour’ of the Malaysian econ­omy.

Sus­tain­able growth

Tan also said TTx would have some ef­fect on the coun­try’s tourism traf­fic. Tourists who are price sen­si­tive, cor­po­rate and in­cen­tive groups as well as long-haul trav­ellers who spend longer du­ra­tions in the coun­try may be put off by the tax.

But Tan reck­oned short-stay tourists, like the ones from Asean coun­tries and China, might not be put off by the per-night charge. He added that about 75% of tourists to Malaysia come from Sin­ga­pore, In­done­sia, China, Brunei and Thai­land.

How­ever, he said that Malaysia’s tourism sec­tor is trail­ing be­hind that of neigh­bour­ing Thai­land and Sin­ga­pore. Putting up more bar­ri­ers may de­ter tourists from choos­ing Malaysia as a pre­ferred des­ti­na­tion.

But get­ting tourists in can be fixed by “mak­ing the right noise”, said Malaysia In­bound Tourism As­so­ci­a­tion (Mita) pres­i­dent Uzaidi Uda­nis, re­fer­ring to more ag­gres­sive pro­mo­tional ef­forts.

How­ever, Uzaidi said greater pro­mo­tional ef­forts through over­seas events and me­dia cam­paigns don’t come cheap.

“No­body likes taxes, but we need to be re­al­is­tic about the cur­rent global eco­nomic sit­u­a­tion. Our tourism in­dus­try needs a lot of pro­mo­tion and in­cen­tive, both which can be pro­vided with a more sus­tain­able fund,” he of­fered, call­ing TTx a new model of co-op­er­a­tion be­tween govern­ment and the pri­vate sec­tor.

“With greater funds, our in­dus­try will be able to en­hance ser­vices and tourism in­fra­struc­tures,” Uzaidi said, adding that all these im­prove­ments would be even­tu­ally reaped by tourists to the coun­try.

Uzaidi said all coun­tries have to come up with a more sus­tain­able plan to fur­ther de­velop their tourism scene.

“The tourism in­dus­try is very com­pet­i­tive. There’s no right or wrong tim­ing. At this point, we have to be com­pet­i­tive to get tourists to visit,” he con­cluded.

A new tax im­posed on ho­tel guests is set to pro­vide a sus­tain­able fund for the coun­try’s tourism in­dus­try. — Filepic

Malaysian Bud­get Ho­tel As­so­ci­a­tion pres­i­dent Leong says funds from TTx should be used to im­prove Malaysia’s hos­pi­tal­ity sec­tor.

Malaysia In­bound Tourism As­so­ci­a­tion pres­i­dent Uzaidi Uda­nis says greater funds will en­able the tourism in­dus­try to en­hance ser­vices.

MAH pres­i­dent Cheah says the in­dus­try can ben­e­fit from a more sus­tain­able fund.

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