Senior government officials led by Treasury Secretary P.B. Jayasundera at a meeting with high-fliers in tourism on Thursday, turned down a request to reduce the industry’s burden particularly high taxes and power rates.
“One of our positions is that we have contractual obligations and are bound by it. This is a burden we cannot carry at the moment. It’s quite high,” said one hotelier who was present at the meeting.
The industry has been concerned about increasing electricity rates, which have risen as much as 100-110 % and subsequently reduced on a complaint to the Public Utility Commission (PUC), and increased taxes in the budget. The budget reduced the Nation Building Tax (NTB) to 2 % from 3 % (which is a tax on income) but brought tourism into the net when it was exempt earlier.
Though it was meant to apply to 4-5 star hotels, the government then roped in all hotels whose turnover exceeds Rs 12.5 million a quarter which industry officials said would now apply to many hotels. However a senior official at Sri Lanka Tourism said SMEs won’t be affected by this ruling (as their turnover is less).
However hoteliers argue that revenue must come from growth which was the focus of the budget and growth could get affected by such taxation.
According to Lakshman Ratnapala, Emeritus President and CEO of Bangkok-based PATA (Pacific Area Trade Assocation), governments all over are fond of taxing tourism. “This is a dangerous situation. I was speaking to a hotelier in Negombo who say they pay up to 30% in taxes. Taxation inhibits growth; it can affect job creation. They should free to invest more, to expand,” the one-time Ceylon Tourist Board staffer who lives in the US, said.
On the proposed new online visa facility, the industry was told at the meeting that it would likely be enforced from April or May this year, subject to approval by the President, with a visa fee of US$ 10 being suggested and slightly more for urgent approvals. “While we are not opposed to visas being a source of revenue to the government, we are concerned about possible delays in the process and travellers being inconvenienced. Many travellers decide at the last minute – sometimes 24 hours before getting on a plane – and I hope the visa process will not deter this kind of traveller,” another travel trade personality, who was also present, told the Business Times.
Referring to the power issue, he said tourism has been categorised as a special industry when it should be treated like any other industry. “We requested that we be treated as any other sector or industry rather than a special case with high power rates but that was not accepted by the authorities,” he said.
Kalpitiya hotels in limbo
By Duruthu Edirimuni Chandrasekera
Treasury Secretary, Dr. P.B. Jayasundera is meeting the six investors shortlisted to invest around US$ 500 million in the Kalpitiya Integrated Tourism Resort Project (KITRP), according to informed sources.
“He met with Sunmarina Resorts Ltd, which is the highest bidder with US$ 270 million and had a chat with the others on Wednesday," a source told the Business Times, adding that the Technical Evaluation Committee (TEC) has submitted their recommendations shortlisting six parties, but it’s not clear whether the tender has been cancelled. “It is also not clear whether they want to issue fresh bids to attract weighty investors, as the TEC is not happy with the six they chose,” he added.
He said bids to develop 10 islands in Kalpitiya in the Puttalam District came from Indian parties. Some others such as Integrated Resorts Ltd and Taprospa Resort have also applied for KITRP. "There are some local players as well, but they are not 'big' names," the source said, adding that none of the local conglomerates has applied.
There were no bids from any western chains, either.
These bids were solicited to put up tourist resorts, golf courses, marinas, etc in this zone which was defined as a tourist zone by the Sri Lanka Tourism Authority. The islands which are to be leased for 30 years to the investors comprise a marine sanctuary with a diversity of habitats ranging from bar reefs, flat coastal plains, saltpans, mangroves swamps, salt marshes and vast sand dune beaches.
There are 17 islands in the Kalpitiya area and work has already begun on tourist resorts on two of them by an Indian and a Maldivian firm.
Last July the Sri Lanka Tourism Promotion Bureau said that Qube Lanka Leisure, an Indian firm, is to build 200 beach villas worth US$ 16.8 million and Sun Resorts, a Maldivian firm, is to invest some US$ 1.2 billion to build 150 water bungalows in two islands.