Assembly members give approval to new tax on revenue from tourism |13 December 2022
Altogether 29 Assembly members yesterday voted for, no one voted against and no one abstained to approve the new tax the government will be introducing on revenue for medium and large hotels to be implemented starting January 1, 2023 at a rate of 2%.
This will be possible through theAccommodation Turnover Tax Bill 2022 which the
Minister for Finance, National Planning and Trade, Naadir Hassan, presented yesterday morning for Assembly members’ consideration and approval.
Minister Hassan was flanked by the secretary of state for finance Patrick Payet, the commissioner general of the Seychelles Revenue Commission Veronique Herminie, among other key officials.
In his presentation of the Accommodation Turnover Tax Bill 2022 Minister Hassan reminded Assembly members that as he announced in his recent budget address for 2023, the government will soon be introducing a tax on revenue for medium and large hotels to be implemented starting January 1, 2023 at a rate of 2%.
“The tourism industry is the first economic pillar of our country and we expect this sector to contribute more towards business tax collection but this still remains a big challenge. An analysis conducted on the business tax regime has highlighted that the tourism sector is contributing only 8% towards business tax. But is this fair?,” Minister Hassan asked.
He noted that the analysis was conducted with the assistance of the Organisation for Economic Cooperation and Development (OECD ).
Minister Hassan reminded Assembly members that the country is aware that as a result of transfer pricing, the country is losing a lot in revenue.
He went on to note that recently approved amendments to the Business Tax Act will bring new provisions to reinforce related laws and minimise the losses in revenue.
“But still this is not enough and we have observed that a lot of revenue is not being collected. With the implementation of the new Bill, the country is expected to collect R118 million in 2023. The new tax will be applicable only on certain tourism establishments as per the first schedule of the Bill namely hotels, guesthouses, self-catering, yachts, cruise ships, but whose recorded revenue is R25 million or more the previous year,” Minister Hassan stressed.
He went on to remark that based on tax returns submitted for the year 2021, the government is expecting that the tax will be applicable to around 11 hotel establishments only which altogether their revenue amounted to some R4.75 billion in 2021 but they paid only R60.1 million under the business tax which represent only 1.3% of their total revenue.
Minister Hassan informed Assembly members that among the 11 large hotels only four of them paid their business tax in 2021. As for the small hotel establishments, in 2021 they collected around R34.9 million in revenue and they paid a sum of R3.03 million in business tax which represent 8.7% of their total revenue.
“Even if the tax will be applicable on the total revenue recorded the previous year, to determine if an establishment qualifies to pay the tax, businesses will have until the 21st of the following month to pay the taxes.
The few members who intervened on the Bill highlighted some pertinent points namely the need to separate small from big hotel establishments, the impact of the new tax on the service charge, the need for stronger regulations to capture revenues in the yachts and cruise ship sectors, a clearer definition for accommodation, proper monitoring to ensure businesses who qualify duly honour their commitment, no penalties specified in the provisions to deal with defaulters, among other points.
In his right of reply Minister Hassan clarified the above mentioned points and others raised by the MNAs and also noted that this is but one of several more measures to be introduced to further modernise the tax regime and also make it more practical in its implementation.