Home-sharing, Airbnb to rise due to tourism tax

By NG MIN SHEN & MARK RAO

Demand for home-sharing services and Airbnb accommodation is expected to rise as consumers seek cheaper non-bed tax lodgings for their business or leisure trips away from home.

The government will start to collect the tourism tax starting next month for hotel accommodation, but the law exempts online booking Airbnb accommodation and home-sharing lodgings from a similar levy.

Institute for Democracy and Economic Affairs (IDEAS) senior manager in external relations Azrul Mohd Khalib said the hotel levy, which will be effective July 1, will spur the demand for unregistered lodging providers — a segment dominated by Airbnb services.

“Currently under the tourism tax framework, home-sharing service providers with less than 10 rooms are exempt from the tax, while Airbnb hosts remain unregulated,” he told The Malaysian Reserve (TMR).

The Tourism Tax Bill 2017 — which was passed in the last Parliament sitting — had created a storm recently between Sabah and Sarawak with Tourism and Culture Minister Datuk Seri Mohamed Nazri Abdul Aziz.

Mohamed Nazri announced that the tax will be implemented next month, but the two states want the tax to be distributed to their respective tourism authorities. The tourism sector is a key money generator for Sabah and Sarawak.

Mohamed Nazri had projected a revenue of about RM650 million with just a 60% occupancy rate for the over 11 million hotel rooms.

Putrajaya had intervened in the Mohamed Nazri-Sabah-Sarawak row and said all parties had agreed to resolve the impasse amicably.

Hotel associations and stakeholders had criticised the tax as it would affect the country’s tourism sector.

The local Airbnb segment is growing as more “self-made” entrepreneurs cash in on the rising demand for accommodation.

Presently, there are 11,698 Airbnb and 6,452 unregistered operators in Malaysia, according to the Malaysian Association of Hotel Owners.

However, less than 15% of accommodation providers in the country, or about 3,126 hotels, are registered with the Tourism and Culture Ministry. These premises will collect the tourism tax.

Under the new tax regime, guests will be charged RM20 per night for five-star rated hotels, RM15 (four-star), RM10 (three-star), RM5 (two-star) and RM2.50 (non-rated) hotels.

Industry experts had warned that more people would gravitate towards cheaper alternatives such as Airbnb accommodations and homestays if hotel rates, coupled with the tax, proved to be too costly.

A check by TMR showed the average price per Airbnb per night in Penang is RM257. Accommodation in Kuala Lumpur for Airbnb would average between RM201 and RM204 per night. There are also lodgings for as low as RM100+ per night or less for both these locations.

Besides being exempted from paying the tourism tax, Airbnb customers do not have to pay for service charges, Goods and Services Tax or the local tourism tax.

IDEAS CEO Wan Saiful Wan Jan warned that the tourism tax would severely impact locals more than foreigners.

“This tax will have minimal impact on tourist arrivals. This is not a tax just on tourists, but it will hit all Malaysians too.

“Lower income families visiting their children at boarding schools, people going outstation for meetings, visiting relatives in hospitals or attending weddings, they will all be affected. While tourists may not feel the pinch, locals will be hit,” he told TMR recently.

But Azrul did not dismiss the possibility that the tourism tax will be expanded to include Airbnb, home-sharing and other non-

traditional lodging services due to its growing popularity.

“The government will sooner or later realise that the home-sharing sector is a huge revenue earner and will be tempted to regulate and tax them, too,” he said.

However, it is unclear how the government would charge the levy for these unregistered and non-traditional lodging providers.

Some cities in the US had proposed measures to address the Airbnb boom — including to insist the operators to get a permit.

Azrul said while taxing the unregulated alternative accommodation industry would be difficult, the government would likely “force” Airbnb providers to register as businesses.

“But taxing them could stunt the growth of the industry, depriving individuals and families of the much needed revenue, and cause people to be discouraged from participating in this economic activity,” he said.