Hoteliers urge rethink of land tax

Hoteliers urge rethink of land tax

Association says revenue lags price appraisals and pushes for levy delay

Though Thailand tested the waters with the Sandbox and Test and Go reopening schemes last year, the tourism industry still struggled to post arrival numbers anywhere close to the pre-pandemic level, as the total number of foreign visitors last year tallied 427,869.

Further relaxation of the Test and Go scheme might create better momentum for this year, as 646,812 visitors have arrived between Jan 1 and April 19, but the government's goal of 10 million visitors this year will not generate enough income for the whole industry, tourism-related operators say.

On Monday, the Thai Hotels Association (THA) submitted a petition to the government asking related authorities to reconsider collecting the full rate of the land and building tax this year, claiming the new levy will harm struggling tourism operators.

"The government should carefully look at the context as hotel revenue remains much lower than the value of properties, especially for those in prime locations," said Marisa Sukosol Nunbhakdi, president of THA.

"Tax calculation based on land appraisal is not reasonable in this environment because some properties remain closed. If the government doesn't continue measures such as the tax cuts issued in 2020-21, more hotel workers might lose their jobs as employers choose to cut expenses on payroll instead."

THA said international arrivals in 2021 nosedived by almost 93%, while the number of domestic trips nationwide decreased by 68%. This directly affected hotel operators as many of them could not stay in business because of insufficient guests, she said.

Mrs Marisa said this year has been no better as hotels have shouldered additional costs for healthcare measures and the Russia-Ukraine conflict has hurt bookings. Hotels cannot maintain revenue and repay debts that accumulated the past two years, she said.

"Those suffering the most are small and medium-sized hotels. Some hotel owners came to us for help because they don't have enough cash flow to pay for a tax bill of around 90,000 baht," said Mrs Marisa.

"This sum is quite a burden for small businesses that have already suffered for two years."

Pongsakorn Ketprapakorn, president of the Tourism Council of Phangnga, said in addition to the petition from hotels around Thailand, 17 tourism associations in the South submitted a separate letter voicing similar concerns.

Mr Pongsakorn said hotels face a critical challenge from the new land tax, which will account for around 16% of total operating costs.

Amid surging expenditure, hotel operations in the third quarter are poised to earn much less income than during the first five months this year, as the the fourth phase of the domestic stimulus campaign "We Travel Together" ends in May.

The low tourism season during that period means tourists will take fewer trips because of unfavourable weather, he said.

- Finding a way out - 

Phuket remains the most famous destination along the Andaman coast, but Phangnga offers similar natural beauty with a more tranquil atmosphere, said Mr Pongsakorn.

Prior to the outbreak, Phuket earned 440 billion baht in tourism revenue, almost seven times higher than the tally for Phangnga at 65 billion baht.

From Nov 1, 2021, to April 24, 2022, Phuket recorded 427,563 foreign visitors, while Phangnga lagged behind with only 30,000 tourists since the beginning of the year.

"Our income doesn't match land price appraisals, which continue to rise progressively every year. The tax burden might trigger some owners to sell their properties to investors from Hong Kong, Singapore and Canada who are looking for long-term investment and have cash to spend," he said.

With turbulence on the horizon, tourism operators in Phangnga are struggling on their own to maintain revenue as they seek ways to improve the market during the third quarter, said Mr Pongsakorn.

"If the government decides not to introduce a fifth phase of 'We Travel Together', we will run a provincial promotional campaign called 'We Travel by Ourselves', with the service sector in Phangnga offering 20-40% discounts, similar to the government subsidy of 40%, in an attempt to stay alive," he said.

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