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Posted: 29 Dec 2010 | 10:04 am
Phang Nga's Provincial Administration Organization's (OrBorJor) decision to hike local hotel room tax from 1% to 2% has caused concern amongst hoteliers, especially those in tourist dependent Khao Lak.
The recent change came without notice to hotel owners and is set to hit hotel owners in a region where the majority of their revenue is derived from long term rate agreements with travel wholesalers and agents.
Given these contracts come with substantial lead time properties now are forced to absorb the tax themselves which will reduce bottom operating profits.
Phuket has a long and controversial storyline where only 1% is being charged to hotels. A well documented media conflict between former OrBorJor President Anchalee Vanich Thepabutr and the hotel sector took place with many hotels refusing to pay.
Collections of the tax remain a touch point to the present day on the island.
To clarify the legal standing of Provincial Administration Organization's ability to apply room tax for hotels we spoke to the lawyers at Duensing Kippen Tax and Law who responded with the following clarification:
"According to Provincial Administrative Organization Act A.D. 1997 ("PAOA"), a Provincial Administrative Organization ("Orborjor") is a government office administrating various provincial matters.
Each province has one Orborjor, consisting of an Orborjor council and Chief Executive of Orborjor.
Sections 45(1) and 51 of the PAOA empower Orborjor of every province in Thailand to issue regulations applicable to that specific province.
Section 65 of the PAOA empowers the Orborjor to collect a fee from the hotel guests (as defined under the Hotel Act), a rate of which is specified in the Ministerial Regulations issued under the PAOA.
Ministerial Regulation No. 4, A.D. 1998 sets the maximum rate of the fee collectible by Orborjor from the hotel guests at 3% of a hotel room rate. A hotel manager must collect said fee and forward to Orborjor by the 10th of the following month.
In conclusion, if Orborjor of any province wants to collect the fee from the hotel guests, it can do so by issuing Orborjor regulations, and at the rate of not exceeding 3% of a hotel room rate.
Therefore, if Orborjor Phang Nga issues the regulations to collect the fee at 2% of a hotel room rate, it can legally do so."
Viewing the above by law the legal maximum that the OrBorJor can collect is 3% so this looks to be a contentious issue going forward for the hotel industry in the future.
We contacted a number of hotels in Phang Nga, and the obtained a varied response ranging from some who had received the official notices to a large number who had not. Stay tuned for updates on this in the new year.
(I'd like to acknowledge a media report in online publication Phuketwan for raising this issue with the public who subsequently queried us for more details, which we then researched and obtained industry information.)
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