Entertainment tax hurts theme park operators’ expansion

High levy has forced prices to surge and crippled expansion plans

By ALIFAH ZAINUDDIN / Pic By ISMAIL CHE RUS

Theme park operators are facing a difficult period as the 25% entertainment tax slapped on visitors are making visits to these establishments more expensive, while management costs are spiralling. Sunway Group, which is managing the country’s most popular wet and dry theme parks on the outskirts of Kuala Lumpur, said the levy had forced prices to surge and crippled the operator’s expansion plans.

The entertainment tax, which was first introduced under the Entertainment Duty Act 1953, was later extended to include theme parks in 2014.

Sunway Malls and Theme Parks CEO Chan Hoi Choy (picture) said the additional levy has been a bane for the industry, which is burdened with high overheads and cost to woo visitors.

“Theme parks are capital-intensive investments where returns on investment typically go through a long gestation period before it breaks even, or becomes profitable.

“In addition to the 25% entertainment tax, there is also the 6% Goods and Services Tax. Altogether, a 31% tax effectively means close to a third of the ticket price is taken off,” Chan told The Malaysian Reserve in an interview.

The country’s leading theme park operator has suspended all new theme park-related projects due to financial constraints.

Chan said the removal of the  entertainment tax on theme parks would provide operators with financial flexibility to create more attractions and offer affordable leisure.

“We had planned to do a theme park at Sunway Iskandar, but at the moment, this has taken a backseat because of the tax,” Chan said.

He said the “archaic” legislation should be revised to reflect the dynamics of today’s business environment, especially as Malaysia sets out to become the theme park capital in the South-East Asian region.

The local theme parks attract around 13 million visitors annually and contribute about RM3 billion to the country’s gross domestic product (GDP).

Chan said the number of visitors in these parks nationwide represents about a quarter of what the world’s theme park capital, Orlando in Florida, achieve per annum. He stressed that more should be done to promote the attractions industry, given its potential to generate revenue for the country.

“We are appealing to the government to repeal the entertainment levy and give incentives on corporate tax.

“We need to create more destinations to encourage more attractions that will make Malaysia a key destination in Asia,” he said.

The theme park boom in Asia has seen Malaysia’s attraction count almost double within the last five years and more such parks are expected to come online by 2020.

However, the number of such theme parks in the country pale in comparison to China’s plans to construct 65 major amusement parks in the world’s most populous nation.

A report by the United Nations World Tourism Organisation projected an average increase of 43 million international tourist arrivals per year globally, with the figure expected to hit 1.8 billion by 2030. It said the Asia-Pacific region will gain most from the inbound arrivals.

Last year, Malaysia recorded an 8.5% rise in passenger traffic at the country’s 39 airports with 96.54 million passengers. Of the total, 51% were international arrivals.

Meanwhile, the tourism industry’s direct GDP contribution last year stood at 4.2%, with the proportion expected to increase over the next 10 years to 5.2%.