Tourism industry urges review of fragmented tax system
PETALING JAYA: Hotels and travel agents want Malaysia’s tourism-related taxes and charges streamlined, claiming that the current system has become fragmented, increasing costs for businesses and travellers.
The Malaysian Association of Hotels (MAH) and the Malaysian Association of Tour and Travel Agents (Matta) said there is little transparency on how the revenue is channelled back into developing the tourism industry.
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They said the current framework should be reviewed to improve clarity, consistency and administrative efficiency, with more of the revenue ring-fenced and reinvested into tourism rather than disappearing into general government revenue.
MAH CEO Isaac Raj said hotels are required to administer the federal Tourism Tax as well as a growing list of state-level tourism charges, including heritage charges, sustainability levies, island conservation fees and other state-specific charges.
“The varying structures and implementation mechanisms create unnecessary complexity for hotel operators and guests, while also increasing the administrative burden on hotels,” he said.
Hotels frequently received enquiries from guests who mistakenly assumed these charges were imposed by the hotels themselves, he said.
The misunderstanding is so common that many hotels prominently displayed printed copies of the Tourism Tax Act 2017 at their reception counters to help clarify the nature of the charges.
Isaac said MAH also wants to know how revenue collected under the federal Tourism Tax is utilised, and proposed that a portion be channelled into a dedicated tourism resilience fund to support the hotel industry during periods of crisis.
On the impact of the charges, he said higher accommodation costs could influence price-sensitive travellers and encourage some to choose unregulated short-term rental accommodation instead of licensed hotels, creating an uneven competitive landscape.
“Higher accommodation costs could also reduce visitors’ spending on dining, shopping, attractions and other tourism-related activities.
“If these charges remain, we hope the revenue collected is clearly reinvested into tourism marketing, infrastructure and destination development.”
Matta president Nigel Wong said tourism businesses are affected by charges paid by tourists, licensing fees, regulatory charges and compliance costs imposed on operators.
He said the cumulative effect of overlapping taxes, levies and fees make Malaysia a more expensive destination, adding that tourism taxes and levies should be used to strengthen the industry rather than simply generate government revenue.
“The government should earn more revenue by encouraging greater tourist spending rather than imposing additional tourism-related taxes.”
Wong urged stronger enforcement against illegal accommodation providers and unlicensed travel operators, saying they contribute to revenue leakages while legitimate businesses continued to shoulder the tax burden.
