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Any Tourism Tax collected should rightly come to Sabah
Published on: Sunday, June 18, 2017

By Datuk John Lo
Two glaring issues need to be impressed on Sabahans.

First, the tourism tax has been passed in parliament without opposition or comments from our MPs as claimed by the Federal Minister concerned. If true, why our Sabah MPs have kept quiet and let this be steam-rolled into our door step? They should know this tax can do harm to our tourism industry that has been painfully built up and nurtured by Sabahans. Time’s up for Sabahan MPs to wake up from their deep snooze.

Tourism has become a very important industry to Sabah and Datuk Musa has designated it as one of the economic pillars of Halajutu. Second, the implementation date is 1 July 2017, NOT 1st of August, which is only a few days away! Not much time to do anything – including talking and negotiating with the Federal Government.

Tourism tax is not new. USA and other many tourism revenue dependent countries have it.

The American tourism tax system is complex and is imposed at Federal, state and local authorities, i.e. counties, cities and towns. Maldives whose only revenue is from tourism has imposed a “bed tax” since October 2016, aptly named as the Government has levied a tax on all beds for tourists.

The Federal and Sabah Governments have become highly dependent on tourism for revenue, economic activities, especially creation of employment and economic growth. The Federal Government is, by far, the largest beneficiary from tourism – GST 6pc, visa fees, airport tax, company tax from hotels and tourism related companies, high custom or excise duties especially on tobacco and alcohol, shopping malls, tourism related vehicles and licensing fees. Unlike other industries, the tax revenue base from tourism for the government is the widest in Malaysia.

Not being knowledgeable in tax and legal matters, I cannot comment on the constitutionality of the tourism tax.

Sarawak has mentioned that such tourism tax is not in accordance with the Malaysia Agreement – an interesting point which our legal minds can look into.

The Federal Government has done a lot to promote Malaysia as a tourism destination over the years.

The States in W Malaysia have contributed little efforts, Penang is the exception. The focus on tourism drive was and has been largely on KL, Klang Valley, Langkawi and Johor Baharu. To be fair to Sabah, we have built up the tourism industry with little help from the Federal Government. Though Sabah has much more tourism potential than most of the other states, Tourism Malaysia has steadfastly stuck to the idea that Sabah is only one of the 13 states. It cannot give any special attention to Sabah. In fact, for many years, there were hardly any information and promotion materials on Sabah in Malaysian Tourism offices overseas.

Historical reality is that the Federal Government was more a hindrance than help in tourism development for Sabah. The most obvious and worst was the protection for MAS by not allowing other airlines to land in KKIA.

This could have strangled Sabah tourism industry. Sabah persisted, persevered with tons of patience with all the man-made “inconveniences”. The first big break-through was when Tan Sri Chong Kah Kiat became Minister of Tourism. He pushed and pushed for tourism. As Chief Minister for two years, he allocated larger budgets and encouraged airlines to come. Through his good office, I was able to brief ex-PM Tun Mahathir twice on Sabah’s predicaments especially regarding air access for Sabah in 1999. Tun Mahathir, much to his credit, then approved for more airlines to come to KKIA.

Musa, being very conversant with business and the economy, straight away saw the potential of tourism when he assumed office as Chief Minister in 2003. Tourism was to become one of the economic pillars in his Halajutu vision.

He actively promoted this industry and most importantly, continued to give substantial budgets for it every year.

He has gone much further than just giving allocations for tourism. He has encouraged the development of hotels and international hotel brands to come to Sabah. To his credit, the Sabah Government has approved plan for the coastal area from Tuaran to Kota Belud to be designated as the “Gold Coast of Sabah”.

He has initiated two major projects which will be the exciting anchor developments for future tourism – The Tanjong Aru Eco-Project and Sabah International Convention Centre. TAED is about to take off.

SICC, which is at an advanced stage, will be completed by end of next year. Musa has also succeeded in getting PM to provide substantial funding for these two projects.

The point I am leading to is simply this. Notwithstanding the legal position of this tax, I think it is not fair for the Federal Government to impose this tourism tax without consultation with and obtaining the agreement of the Sabah Government. The Federal Government has contributed very little to grow this industry.

It lacks moral authority to impose its will on this tourism tax. Justice would dictate that it should let the Sabah Government collect this tax to be spent in Sabah.

I don’t buy the idea that Sabah will get 1/3 of the tourism proceeds from Federal Government for the following reasons:

[a] Does the person who says sharing can be done have the authority to say so? If so, what is the source of his authority.

[b] Any tax collected cannot be designated for a specific purpose. All must go into the “consolidated fund” under the control of Ministry of Finance. Once in, there is no telling where the money will go as it will be allocated through the annual budget. So, don’t believe Sabah will get 1/3. It is a fallacy, nothing more, nothing less.

Sarawak Government’s withdrawal of her representative from Malaysian Tourism Board is an eye opener.

History will tell us promises of money will soon be forgotten. To get some allocation from this tourism tax will be like extracting a tooth of the Federal Government. Sabah will have to beg, with head bowed low.

Let’s us be practical – better we collect the tax and use it on Sabah. This way, we can control it.

Look at the harsh words being used, the scolding to rationalise the tourism tax. Imagine the words that will be used when we ask for the tax collected in Sabah to be given back to Sabah. Will there be even more hasher words for the Sabah Government?

Whatever passed in Parliament is not cast in stone. The Federal Government, in the spirit of BN, can still let Sabah [and Sarawak] collect the tourism tax to be used in Sabah.

One last reason is that the Federal Government, in the name of national interest and maximum effectiveness, should really start the process of decentralizing the promotion of tourism. Sabah is the best performing state in tourism. It is better positioned to fine-tune the tax rate to accommodate ups and downs of the industry.

Why not let the Sabah Government collect the tourism tax so that it use it more effectively?

The other pressing point is that the full potential for tourism in Sabah has yet to be realised.

Through many years of having promoted tourism, the Sabah Government are in a better position to grow tourism industry more effectively. No other state government can match Sabah’s performance.

For this, the Sabah Government will require substantial funds. The purposed tourism tax should rightfully be collected by the Sabah Government and utilised in Sabah.

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