Deferral of tax hike proposed to shore up tourism services

      The Tourism Working Group has insisted on a delay for the increase of the Special Consumption Tax (SCT) as this will make life more difficult for many companies in the hotel/resort industry.
From April 1, higher SCT rates will apply to some tourism-related services, including golf associated revenues, from 10 to 20%, and body treatments, from 15 to 30%.
"The Government should be looking for ways to stimulate additional spending on domestic goods and services, not raise taxes so as to deter it," said Baron R. Ah Moo, chairman of the Tourism Working Group under the Vietnam Business Forum.
The upcoming changes in the SCT are not being well received by the tourism community in Vietnam, according to the Tourism Working Group.
Ah Moo said in a statement sent to the Daily that the percentage of repeat international visitors after their initial visit was relatively low compared to Thailand and Indonesia.
"Vietnam's tourism industry already faces difficulties in visas and a lack of proper infrastructure," said Ah Moo, who also serves as chief executive officer for Indochina Hotels and Resorts and Danao International.
"By increasing the SCT, you have now impacted one of Vietnam's last sustainable competitive advantages, its appeal as an affordable leisure destination," he said.
The group said the National Assembly voted to temporarily reduce value-added tax (VAT) from 10 to 5% for hotels and related services in an effort to encourage discretionary spending and the SCT increase seemed to contradict this policy.
The Vietnam National Administration of Tourism reported that Vietnam attracted over 688,700 international visitors in the first two months of this year, down 10% compared to the same period last year.
The tax increase also coincides with the start of the low season for travel to Vietnam, where demand is anticipated to be significantly down.
"I would appeal to the Prime Minister to delay or defer the implementation of the increase in SCT to a later date in an effort to minimize the impact on an already struggling hospitality industry," Ah Moo said.
He said tourism was a US$4.5-billion industry in Vietnam and accounted for 11% of the total employment in the country and suggested that removing burdens such as the SCT should be the country's highest priority.
The tourism sector is looking to around 25 million travelers, including 4.3 international visitors, and revenue of around US$3.7 billion this year. Tourism experts said these targets will be hard to reach.
Last month, the number of Chinese visitors was down nearly 13%, just over 41,000, and the number of international visitors was down 0.8% to nearly 343,000.
Last year, Vietnam drew 4.25 million international travelers, up a mere 0.6% over 2007.