I am writing to provide you with an update on the meeting between the Federation and relevant government bodies, including the Financial Services and the Treasury Bureau, the Inland Revenue Department, and the Tourism Commission. The purpose of this meeting was to express our concerns regarding the imposition of the Hotel Accommodation Tax (HAT) and its potential impact on our industry.
At the meeting today, our Federation led by our Vice Chairman, Mr Raymond Chow, JP, in collaboration with the Hon Perry Yiu, Hong Kong Hotel Association and Hotel Controllers & Accountants Association highlighted the significant challenges faced by the tourism industry in Hong Kong, particularly in light of the current challenging economic environment and existing geopolitical tensions. We emphasized that the introduction of the HAT may further hinder the recovery efforts of our industry.
HAT will hinder the recovery efforts of the Tourism industry
In addition to the HAT, rising energy costs, manpower shortages and recent announcement related to the amendments on "418" continuous contract requirement, escalating expenses related to waste management, and the implementation of the Eco Bill aimed at reducing plastic usage and proposed amendments on Buildings Energy Efficiency Ordinance. These factors collectively affect the competitiveness and add additional financial burdens to our trade.
We further discussed how the imposition of the tax may have negative impact on our industry:
-
Potential cancellations of corporate and MICE travel or a decrease in group sizes due to budget constraints.
-
Negotiating corporate rates will be more challenging as travelers perceive the tax as an added expense to their travel budgets.
-
Negative impact on property valuation and under-performance of assets.
-
Deter future investments of hotel development and decrease supply of hotel accommodation.
-
Given the tight implementation timetable, higher demand of manpower and operational cost to prepare for the HAT adjustment.
-
Moreover, there are concerns that the decrease in economic activities resulting from fewer visitors could outweigh the gains from the added tax revenue.
The government reassured us of their commitment in tourism and overall economic recovery, highlighting the increased allocation of resources to the tourism sector in this year's Budget. They emphasized that Hong Kong still maintains a competitive advantage in terms of tax rate compared to global and regional standards. The main consideration for the fiscal consolidation program is to contain the growth of operating expenditure and adjust fees and taxes based on the "affordable users pay" principle, with no intention to penalize any particular trade.
What is next?
During the meeting, we also sought clarification on the implementation and exemption details of the HAT, such as the calculation method, treatment of long-stay business, service fees, and other hotel-related services etc. The Inland Revenue Department has prepared materials and Frequently Asked Questions (FAQ) on their website and issued letters to all hotel/guesthouse operators advising them of the impact of the proposal, and they have also set up a dedicated team to address any questions or concerns from our trade. Furthermore, in response to our request, they are willing to organize sessions for our trade to provide further clarification.
Inland Revenue Department - Inspection Section at 2594 3066 (email: taxinfo@ird.gov.hk). Additional information with FAQ is also available on the IRD website at https://www.ird.gov.hk/eng/tax/hat.htm
The Federation also exchanged views on how to maximize public funds in tourism to benefit the hotel trade specifically. Ideas were discussed, including supporting efforts to lower operational costs, enhancing promotion for hotels, facilitating better coordination and offer concession deals for hotels to enhance collaboration of mega-event promotions, and implementing schemes to enhance the trade's image, address manpower shortage issues and review of the Hotel Rateable Valuation etc. We also voiced comments regarding the allocation of over $1.09 billion to strengthen tourism development and organize events, such as the allocation to the Hong Kong Tourism Board (HKTB) and wish to know how the effectiveness of their initiatives are measured in attracting overnight tourists and generating higher returns for the hotel trade.
We understand that these matters are of utmost importance to our industry, and we will continue to actively engage with the government to advocate for our members' interests. Our collaboration with the Hon Perry Yiu and other relevant stakeholders remains crucial in ensuring that our concerns are heard and addressed. We value your ongoing support and commitment to the Federation. Together, we will navigate these challenges and work towards a prosperous future for Hong Kong's tourism and hotel industry.
