A policy rewarding top-rated hoteliers and tourism-related business operators with five-year housing and land value tax reductions was heavily criticized at a meeting of the legislature’s Transportation Committee yesterday, with lawmakers accusing the Ministry of Transportation and Communications (MOTC) of trying to salvage the nation’s tourism industry at the expense of local governments.
The policy, which took effect on Sunday, marks the government’s latest effort to help the tourism industry, which has been hit hard by a decline in the number of Chinese tourists. It applies to hoteliers and tourism businesses that have been recognized by the Tourism Bureau as excellent.
Under the new scheme, qualifying operators pay reduced taxes for five years, after which the government can decide to award them a five-year extension.
Photo: Liu Hsin-de, Taipei Times
At least 500 tourism operators are expected to benefit from the policy, the ministry said.
Democratic Progressive Party (DPP) Legislator Cheng Pao-ching (鄭寶清), from Taoyuan, said that about 61 hotels in the city could benefit from the policy and this would cause a shortfall in tax revenue for the city government of about NT$140 million (US$4.63 million).
As a complementary measure, the central government needs to budget additional funds to reimburse local governments for the loss in housing and land value tax revenue to make the policy feasible, Cheng said.
The government must scrutinize operators that qualify for tax breaks, Cheng said, adding that in the worst-case scenario, the government could fail to save hotels from going bankrupt while at the same time creating a tax loophole.
DPP Legislator Chen Ou-po (陳歐珀) said he did not oppose the government granting hoteliers and tourist businesses tax breaks, but the ministry is only offering a short-term remedy.
The country needs a long-term strategy to develop its tourism industry, Chen said, adding that the government urgently needed to elevate the Tourism Bureau to a higher level.
Thailand has grown into one of the world’s top tourist destinations after the Tourism Authority of Thailand was created in 2002, integrating all the nation’s resources, Chen said.
The national government should subsidize local governments for the tax revenue deficits and should not ask local governments to find additional sources of revenue to make up the tax revenue gap, Chinese Nationalist Party (KMT) Legislator Hsu Chen-wei (徐榛蔚) said.
MOTC Minister Hochen Tan (賀陳旦) said that the ministry had not communicated well with local government officials on the tax break.
However, local governments would not become victims of the tax break, he said, adding that the Tourism Bureau would carefully screen the tourism operators and identify the eligible ones.
As to elevating the Tourism Bureau to a higher-level agency, Hochen said such a proposal had been rejected because it would require drastic change in organizational structure.
However, he said that because of this, the ministry is able to hire talented individuals from the private sector, who do not necessarily have to be civil servants.
Former MOTC minister Chen Chien-yu (陳建宇) criticized the tax break in a letter to the Chinese-language United Daily News, saying that it would not “help the tourism industry stop bleeding and change its makeup.”
Apart from proposals to expand the sources of tourists and ensure stable growth of international tourist arrivals, which are long-term solutions, government subsidies are necessary to help close the tax revenue gap if the government insists on giving tourist businesses tax breaks, Chen Chien-yu said.
Otherwise, local governments would lack the motivation to comply or to come up with additional plans to maximize the tax break policy’s effect, he said.
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