Matthew Vella The Malta Hotels and Restaurants Association and the Federation of Travel Agents (FATTA) expressed “surprise” at government’s announcement that it will proceed with the introduction of the 50c tax per guest per night as of April 2010.
The MHRA denounced the move at a time when tourism was facing uncertainty with a 50% rise in utility tariffs, which it sad would precipitate further the problems the industry is currently facing.
“Not only does this tax discriminate against tourists staying in hotels and licensed accommodation, but we cannot understand how, government last year decided to postpone the introduction of this tax on the basis of the economic scenario affecting the industry then, and then decides to introduce it now, when the situation is not any better,” MHRA president George Micallef said.
“In fact, MHRA is convinced that the situation will only worsen if government goes ahead with the increase in utility rates as announced, as the increases are too substantial, and are simply unsustainable.”
FATTA said it was seriously concerned by “government’s blind stand on the bed tax issue” and warned 2010 would see the departure of at least one legacy airline and a further increase in the dependence on two major low-cost airlines “to an unhealthy level”.
“The uncertainty surrounding the application and collection of the room tax is as much a deterrent to positive performance as is the tax itself. Hotels have generally contracted rates for summer 2010 and now even for winter 2010/11 without including or even mentioning the room tax. Overseas tour operators have priced their packages based on these contracts and are selling to consumers accordingly,” the association said.
MHRA said it strongly disagrees with the Minister of Finance’s choice of words when he said government subsidises tourism by €33 million. “This is not a subsidy at all as money spent on tourism is an investment which reaps substantial returns for government, and is certainly not a subsidy to industry. After all it is not only hotels that gain from tourism revenues but the whole country.”
“We subsidise tourism by €33 million a year. Low-cost airlines are costing the country about €5 to €6 million a year. This is taxpayers’ money. We need to get the tourists here but at the end of the day there has to be a value. No industry can expect the public to subsidise it indefinitely. Our social responsibility is towards the needy – and not everyone is the needy,” Finance Minister Tonio Fenech was reported as saying.
FATTA said the government’s return on its investment arises from VAT and other direct taxes generated by the tourism industry and income tax generated by employment within the industry. “When tourism performs positively, government’s revenue from VAT and taxes naturally increases and government should therefore be more focused on ensuring that the industry speedily emerges from the current crisis. Government is misleading the public and trying to be sensational when it claims to be subsidising tourism by €33 million a year as this is insinuating that nothing is generated by the industry in return.”
FATTA added that it was also misleading when it said the €5 to €6 million a year being paid to low cost airlines is all part of subsidising tourism. “In fact, between 35% and 50% of this is actually going towards subsidising Maltese outbound travelers. Government would do well to carry out more detailed research to accurately determine how much of its ‘investment’ in tourism is actually leaking out of the system rather than relying on the unfounded declarations of the beneficiaries themselves who have a direct interest in playing down the volume of this leakage. It is unfortunate that this leakage is unwittingly contributing to the exodus of legacy airlines and to the negative performance of our home carrier.”
Geroge Micallef said that despite the fact that 2009 was one of the worst years in tourism, it is calculated that government will earn €115 million from tourism activity alone, not including other earnings generated through the multiplier effect. “MHRA calls on government to seriously evaluate the adverse effect these increases are having and will continue to have on the tourism industry, and appeals to government to review its position, before it is too late.”
The latest MHRA survey claims hotels in Malta are predicting a drop in revenue of €54 million in 2009 when compared to the previous year and are bracing themselves for a further blow with the increase in energy prices.
At an average stay of 8.5 nights, the 50c tax costs tourists an average €4.25 for the whole stay. With 9.5 million nights spent in Malta between January and November last year, Malta rakes in €4.75 million in a year.
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