After months of debate and discussion, Sri Lanka is finally imposing a tax on OTAs and online accommodation sites effective April 1, 2018.
The new one per cent tax on commission made on every online sale by both local and foreign OTAs – including accommodation sites like Airbnb and Booking.com – was announced in the national budget for 2018, which was presented by finance minister Mangala Samaraweera last Thursday.
The money will be collected by the government, which is discussing the mode of collection. There is also a proposal to create an e-payment website in which all online businesses local and foreign need to be registered.
The move was welcomed by hotels, many of whom have raised concerns over some businesses having their commissions taxed but not OTAs.
The hotel sector is subject to 12 per cent tax per annum, on top of other taxes that all businesses pay. Foreign OTAs, since they operate abroad, were not subject to any local taxes until the latest proposal.
Local OTAs interviewed, on the other hand, opined that the tax is unfair as they already pay taxes like other companies in the leisure sector. Prageeth Hewage, founder of miracleofasia.lk, said: “Our margins will be affected badly.”
The tax however didn’t surprise the market. Airbnb has for months been in discussions with Sri Lankan tourism minister John Amaratunga and the authorities on this matter. “They (Airbnb) have agreed to pay taxes,” the minister said at a travel conference some months back.
At the PATA Annual Summit which was held in Sri Lanka in May, Airbnb official Thao Nguyen expressed a compliant stance towards taxes.
In Sri Lanka at least 40 per cent of travellers stay in non-formal accommodation from bookings made online.