Fix OTA tax and kill rate parity, Munro urges senate

The CEO of the Accommodation Association of Australia has told a senate hearing that laws designed to make multinational travel agents pay GST are flawed and will hurt mum-and-dad operators.

Richard Munro told the economics legislation committee that offshore giants Expedia and Booking.com will merely pass new taxes on to accom providers, creating greater inequity.

And he urged members to recommend aligning Australia with France, Belgium, Austria, Germany, Italy and Sweden in banning price parity.

Munro said proposed federal laws intended to force online travel agents to pay GST will not affect transactions made under the model governing the vast majority of OTA business in Australia, which sees the OTA acts as the agent and business owner as the principal.

He argued the multinational giants are likely to shift all business to this model (rather than use one in which they are the listed principal) if faced with paying tax in Australia – meaning local operators will be left to bear the direct costs of the new charge.

“It is an unintended consequence of the legislation that global, offshore based, online travel agents will pass on any increases to taxes in Australia to accommodation operators, many of whom are small businesses which have no chance of negotiating a fair outcome with these global behemoths,” he told the committee.

“It is because of the online travel agents, which are effectively global sponge-like entities in Australia, that the accommodation industry will merely hike the commissions they charge operators of accommodation businesses to ensure the online travel agencies do not lose any income as a result of this charge.

“Accommodation operators do not have the same luxury of increasing their room rates to cover the new tax imposed.”

The AAoA CEO also stressed the disadvantages of rate parity clauses, which prevent accom providers advertising  lower room rates on their own websites than those displayed on OTA platforms.

“Increasing room rates at traditional accommodation houses will push even more visitors to stay at unregulated accommodation, such as Airbnb, another global entity which also pays little to no tax in Australia,” he said.

“Unless price parity is banned, in our view, accommodation operators in Australia, including hardworking family-run motels in regional areas, will end up paying this new tax – essentially a bed tax, as we’re calling it.”

The hearing into the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 follows last May’s budget announcement of government plans to make offshore travel agents pay GST in line with local sellers from July.

The AAoA initially welcomed the announcement, but now Munro argues the budget measure will fail to capture any extra revenue from the OTAs with the largest, Booking.com, managing its Australian business almost exclusively from The Netherlands.

“It doesn’t pay GST even though, when an Australian consumer books accommodation through booking.com, the way it displays its pricing gives the impression that it pays GST. It’s actually displayed as VAT, but it’s not remitted,” said Munro.

“Our members, accommodation operators, strongly support – I will re-emphasise this – offshore based agencies paying their fair share of Australian tax. But this new bed tax legislation will not achieve the goal that we’re looking for.”

Mr Munro asked the committee to consider amending the proposed legislation to ensure OTAs are obligated to pay the tax rather than being allowed to pass it on.

Outlining the AA0A’s priorities, he told the committee: “Price parity would be No. 1; No. 2 would be the tax. Complete, together, if you gave us that, we’d be very pleased.”

About Kate Jackson

Kate Jackson
Kate Jackson is the editor of Accomnews. You can reach her at any time with questions or submissions: [email protected]

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6 comments

  1. Avatar

    What Richard may not understand or appreciate is the level of non tax compliance by the Mum and Dad operators. Surely the only component of tax is the service fee or commission that an OTA charges the Mum and dad operator.

    • Avatar

      Glenn
      Thanks for the comment
      Our member comply with tax laws, if they don’t then the ATO will fine them, which is a normal impost on business in Australia for non-compliance and we encourage all of our members to comply with the law.
      When an Australian citizen books online and pays in advance, they are charged a GST or VAT. The OTA remits a net amount less GST or VAT to the hotel, so who do you think keeps this component?
      In addition to that the OTA’s are using the tax law that was meant for Inbound Tour Operators booking foreign citizens to Australia to escape the GST on commissions. I am not a tax expert but from what I see, does not seem right to me – maybe you have a better idea?

      • Avatar

        Thanks Richard, there are two issues in the whole “compliance” and ATO issue. Your members are one thing but really what proportion of the entire industry are members of your association. I speak with many many property owners on a daily basis, the mums and dads you mention. Its why they remove themselves from the professional property management pool and tax evasion is one of the key goals. Under a professional management they have a registered audited trust statement that they furnish in tax returns, manage yourself and its an excell spreadsheet at best. For mine Gov policy should only allow tax deductions and negfative gearing on property returns based if on a a registered audited trust statement. You would see then a flock of property owners moving back to the traditional because all of the benefits includung “cash on arrival” are removed.

  2. Avatar

    If the government/tourism Australia took the lead and developed a booking site that charged operators 8-10% commission and used that money to market Australia to the world we would all be better off.
    If every tourism business was bookable on that site and took themselves off the other OTA’s, the world would soon learn that there are only 2 places to book a room or experience in Australia. The Australia site or the business owners website. Imagine the amount of jobs that would create, promoting Australia. Certainly a lot more than the overseas OTA conglomerates do now and none of that money would leave the country. Bookers could be certain that every business on the site is fully compliant and properly insured (should be a condition of the site). It would also be easier for visitors to find what they need if it was all on the one website. If Australia did this and it worked, other countries would soon follow suit and we could send those parasite OTA’s broke. Just my 2 cents worth.

    • Avatar

      You your two cents worth is worth far more than that because you are absolutely spot on except the government did create the ATDW back in 2003 to drive our national, state and regional tourism sites However the muppert management of late at the ATDW have forgotten to keep up with the times and have left state, RTO and LTO websites as brochure sites. Had they progressed with technology as per their original charter all these sites would now be dominating the OTA sites and they wouldn’t have a look in. See http://www.portdouglasdirect.com

  3. Avatar

    Unfortunately our industry has itself to blame not seeing ahead enough to stop the OTA`s from being so demanding and dictatorial.

    What should happen in our industry is that we charge a price for our room excluding GST to the guest. The GST component of the room should be added to the overall price of the account on departure. At present, the commission we are paying from the OTA`s is charged on the full price of the room including GST, remembering these companies are not paying the GST component back to the government, clearly this being a bonus of 10%, being the GST, given to the OTA`s on top of what the accommodation providers are paying.

    The Mum & Dad operators of motels in Australia should be the one`s being protected as they employ locals particularly in regional areas to enhance the stability of regional towns. To be an independent operator these days must be so difficult as their profit margin has disappeared and given to the overseas businesses such as the OTA`s.

    Unfortunately I`ve haven`t seen enough from the industry leaders to counter the destruction of small business in the accommodation sector. No advertising showcasing the damage to motels around the country, as the general public are still unaware of what is happening and what it means to book their accommodation through these third party websites. The good operators have had to increase their room rate to compensate for the commission however we are now being destroyed by the public on social media for having a room which isn`t value for money.
    That`s my say.

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