3pc hotel tax resumes January 1

Wallis Wang

Guests will have to pay a hotel accommodation tax of 3 percent from January 1, the government said yesterday.

The measure was proposed by Financial Secretary Paul Chan Mo-po in the budget delivered in February as part of a comprehensive consolidation program to restore fiscal balance in a few years' time.

The tax, levied on accommodation charges payable by guests to hotels or guesthouses, was abolished in July 2008.

But the government proposed to resume it at a rate of 3 percent with effect from New Year's Day.

This means travelers will have to pay HK$84 more for a HK$2,800 hotel room and HK$11 more for a HK$380 guesthouse room.

The government served notice to the Legislative Council yesterday to resume tax collection, according to the Financial Services and the Treasury Bureau.

"The hotel accommodation tax will bring an estimated annual revenue of about HK$1.1 billion to the government, providing a stable source of revenue without affecting members of the general public," the bureau said.

The tax "only accounts for less than 1 percent of spending by overnight visitors" and "will not affect" tourists' choice of Hong Kong as a travel destination or their spending sentiment, it added.

The bureau said Secretary for Financial Services and the Treasury Christopher Hui Ching-yu will move the resolution at Legco on October 23 and the resolution will be published in the gazette on October 25.

The bureau and Inland Revenue Department have been reaching out to the hotel and guesthouse industry to help it understand the new arrangement.

The IRD has also organized briefings for industry practitioners and set up a dedicated inquiry hotline and help desk to assist the sector.

In a document submitted to Legco, the bureau said the tax was introduced in 1966 and had been changed from 2 percent to 5 percent before it was eliminated in 2008.

The bureau estimated that around 320 hotels and 180 guesthouses, comprising 92,000 rooms, will be subject to the tax.

Based on the average hotel room price of HK$1,392 per night and average daily guesthouse price of HK$375 last year, the tax will cost an extra HK$42 and HK$11 per night respectively, it added.

"Various economies or cities where tourism is an important pillar of the economy are also charging hotel accommodation tax, tourist tax, value-added tax or a combination of these on hotel accommodation," the bureau said.

It said the IRD will try to absorb the additional workload arising from the tax within its existing resources but may seek additional manpower in accordance with the established mechanism when necessary.

More than 3.3 million visitors came to Hong Kong in May, among which over 1.6 million - or 48 percent - were overnight visitors, Hong Kong Tourism Board figures showed.

Federation of Hong Kong Hotel Owners executive director Caspar Tsui Ying-wai said the tax may affect the competitiveness of hotels while increasing their operational costs.

The government should enhance communication with the hotel sector and implement the policy flexibly, Tsui said.

Hong Kong Tourism Association executive director Timothy Chui Ting-pong believes the tax will not deter tourists from visiting and will not have a huge impact on high-end hotels.

But he said some small or medium-sized hotels may need to shoulder the 3 percent hotel tax to attract more customers.

wallis.wang@singtaonewscorp.com