Jul 16, 2024

Hoteliers demand abolition of luxury tax, citing negative impact on troubled hotel sector

Hoteliers demand abolition of luxury tax, citing negative impact on troubled hotel sector

KATHMANDU, June 01:The Hotel Association Nepal (HAN) has asked the government to remove the luxury tax imposed on four- and five-star hotels in the budget.

The HAN has asked the government to reverse the decision to levy a 2% luxury tax, claiming that it was made after learning from neighboring nations.

The services of quality star hotels, including dozens of foreign brand star hotels that are preparing to open, are expected to be costly. "It is clear that this decision will have a negative impact on efforts to increase the arrival of tourists who can spend a long time," said the HAN in a statement. 
"It is also clear that the increased tax on small electric vehicles, which are used to upgrade tourist services, will have a negative impact."

According to the HAN, the implementation of this agreement will render the investment made in accordance with the target of bringing in only one-third of the entire capacity of the Nepali hotel sector by 2023 ineffective. The HAN says that the state drafted the budget without giving the hotel business priority.

Similarly,HAN has urged the Civil Aviation Authority of Nepal (CAAN), which has sparked controversy with its role in the European Union's blacklisting of Nepali air service safety, to divide their budget into two departments: a policy-making directorate and a service operator for the upcoming fiscal year. HAN opines that foreign tourists will feel an additional burden of value-added tax on air travel since they already pay more than domestic passengers. The HAN has declared its support for the release of budgets for international flights from both Bhairahawa and Pokhara regional airports.

In the post-Covid-19 tourism industry, it is a big plus that environmental impact assessment (eco-audit) was included in the budget. This opens the door to para-tourism development, medical tourism reform, and the possible cultivation of marijuana. Tourists from affluent nations tend to use large-scale travel agencies, so the investment in building highways and star hotels will boost the standing of guesthouses and other lodgings.

The Hotel Association Nepal has been lobbying for governmental action and decisions for some time now. However, their plea to classify hotels as a priority industry rather than simply a service business has gone unanswered, leading to ongoing dissatisfaction within the industry.