Business Times

Tourist Hotels Association sues PCs over taxes

The Tourist Hotels Association of Sri Lanka (THASL) has taken legal action against Provincial Councils who levied a new and arbitrary tax on hotels on liquor and cigarette sales late last year. According to THASL President Srilal Miththapala, the issue is that the tax is levied on retail and wholesale sales and it is quite clear that hotels do not fall into this category since it is a service industry.

In a press release, he stated that although the government continues to identify the tourism sector as the main thrust industry of the economy, the Provincial Councils see the industry as a means by which they can extract more and more taxes. The THASL stated that repeated appeals to all relevant authorities fell on deaf ears and as a result, the Association has now taken legal action.

The THASL said December 2009 continued to show a healthy improvement in tourist arrivals, recording 56,862 for the month, a 16.2% increase compared to December 2008. Total arrivals for 2009 increased by 2.1% to 447,890 compared to 438,475 for 2008. The press release stated that this is very significant because cumulatively up to June 2009, there was an almost 12% drop compared to the previous year which means that in the last six months of 2009, the deficit was not only wiped out but there was also a small 2.1% overall increase. This indicates that without any doubt, the prevailing war situation was the main hindrance.

The THSAL further stated that while the United Kingdom continued to dominate with about 81,500 arrivals, it was significant to note that India generated a slightly higher figure of 82,600 arrivals. Region-wise, Western Europe accounted for 170,000 arrivals while South Asia produced 126,000 arrivals.
Overall, the THASL stated that occupancies in December in the Negombo region and the South Coast were in the 70% to 80% range while Colombo reported rates of around 60% to 70%. Of the other regions, Kandy and Nuwara Eliya did reasonably well but the culural triangle managed only 50% to 60% occupancy levels.

According to the THASL, the minimum room rates now in force in Colombo city helped to dramatically push up yields which was clearly evident from service charge payable to staff increasing to around Rs.12,000 to Rs.20,000 in most of the larger hotels for December 2009. Most hotels in Colombo also saw substantial growth in occupancy levels over the past three months from visitors from the Sri Lankan Diaspora staying at the hotels during the festive season.

However, the THASL says 2010 will be a challenging year for tourism. Most hotels would be contracting rooms at higher prices and it will be vital to ensure that the hotels also refurbish and upgrade where necessary to guard against being over-priced in the region. Several hotels are already planning refurbishing and upgrading programmes and a favourable response to THASL's request for duty free facilities for refurbishment from the government is eagerly awaited.

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