The Malaysian Government has passed legislation imposing a room-night levy on hotels, enabling the country’s DMO to greatly increase spending on tourism promotion and infrastructure.
The new law was voted by the country’s lower house, is officially entitled, the “Tourism Tax Act 2017” and is set to come into operation “on a date to be appointed by the Minister by notification of the Gazette”. Different parts or provisions of the act may be brought into force at different times, however it is estimated that the tax should result in approximately €137m equivalent in annual funding for government operations. The levy should come into force in the next month.
Datuk Seri Mirza Mohammad Taiyab, Director General of Tourism, will be overseeing the superintendence of all matters relating to the tourism tax, subject to the direction and control of the Minister.
The new tax will mean a much-needed boost after a couple of years of declining funding for tourism facilities, due to a drop in oil prices, meaning a consequent loss of state taxes for the South-East Asian nation.
Each year, we have altogether 11 million room nights, so we calculate that at 70% occupancy, we can collect about 650 million Malaysian Ringgit every year
According to YB Dato’ Seri Mohamed Nazri bin Abdul Aziz – Minister of Tourism and Culture of Malaysia, the plan is to place a levy on room nights, which will vary depending on the star-rating of the establishment: “For four and five star hotels, it will be only 20 Malaysian Ringgit per night; that’s about four euro, then it will be three euros for three stars and two euros for two stars. Each year, we have altogether 11 million room nights, so we calculate that at 70% occupancy, we can collect about 650 million Malaysian Ringgit every year (eds: approx. €137m). This money will be used for tourism promotion and for development of tourism infrastructure. Obviously, when tourists come in big numbers, it’s the hotels that will benefit in the long run, and they will understand that the money is being used for good purposes. Furthermore, infrastructure is very important. For example, we have to build new jetties to ensure safe embarkation for tourists when touring the coast and islands.”
The Minister says it has been vital for his government to raise this extra budget, so the tourism ministry no longer has to depend on oil and gas for revenue: “To me this is logical, especially given the growing importance of eco-tourism and the fact we are in the year of sustainable tourism for development. It will not affect the local people, because it is the tourists who will pay, as they are the ones who stay in the hotels, and I strongly believe that tourists will clearly understand that the levy is there for a good reason. In Europe, there are similar taxes, and all those travelling understand that someone needs to pay for the infrastructure and promotion of a destination, so this is not something that is done solely by Malaysia. Singapore has also applied this kind of levy successfully, so this is why am confident it will work well.”
Some concerns had been expressed by hoteliers that those using platforms such as AirBnB might escape the levy, creating unfair competition. The Minister tells us this issue has been dealt with. “To be fair to the hoteliers, when we spoke to them, they asked whether such platforms will be taxed, and I said yes, under the law, if you rent a room and advertise it online, the rental will be taxed… that is fair”, says the Minister. “Homestay is exempt however, as this is a grass roots programme and is part of our poverty reduction plan in rural areas.”
Of course, the initial reaction of some hoteliers was to object, due to the increase in tariffs for the rooms.
However, as the Malaysian Ringgit has gone down against major currencies in the world and as hoteliers are not charging their tariffs in US dollars or euros, travellers will still find holidays in Malaysia to be excellent value for money.
We will create an academy run by tourism Malaysia to train tourist guides
Asked what kind of activities will be funded by the new levy, the Minister told us, “One of the problems that we face is that of language difficulties for tourist guides – especially in
German or French and so on. I’m not talking about those who work with the big groups, but about two or three people coming to Malaysia and who want to engage a tourist guide who speaks German, French or even Russian. At the moment that’s very expensive, so we are going to create a training scheme for tourist guides to ensure that the supply will be there, and then we will fix how much they can charge. For the moment, because there are not many tourist guides speaking German or French, they can ask what they want, and it can be quite expensive. We will create an academy run by tourism Malaysia to train tourist guides… They will also learn Russian and other major languages. Of course, Chinese is not a problem because everybody in Malaysia speaks not only Chinese but also the dialects. 30% of the population are of Chinese descent, so not only do they speak Mandarin but also Cantonese and other dialects.”