The Pakistan Hotels Association (PHA) has decided not to file HT-1 Form relating to bed tax for 2005-06 fiscal till their grievances are redressed. Conveying the decisions of the PHA executive committee meeting held here on August 27, the Association, in a letter sent to the Director, Excise and Taxation Department on August 29, pointed out that the bed tax was not only unfair, but also unjustified.
It has been highlighted that during the last 10 years, the hotel industry in Pakistan, particularly hotels in Karachi, suffered heavily due to acts of terrorism, bomb blasts, Iraq war, Sars, and unpleasant relations with neighbouring countries viz. India, Afghanistan, 9/11 events, etc.
Due to these reasons, most of the Western countries issued travel advisories for their nationals not to visit Pakistan particularly Karachi. Diplomats and NGOs were asked to leave the city, and only essential staff were allowed to stay in the country for quite a long period. Hotels were first to collapse due to reduction in foreign visitors. Also the local and multinational companies cancelled/postponed their seminars/conferences due to overall economic downturn.
The occupancy level during the last 10 years was so low that almost all the hotel companies could not even reach the break-even level and the owning companies had to chip in additional equity/loans for the purpose of continuity of business. Due to the stringent provincial bed tax payable on 70 percent occupancy level against the actual low occupancies, most of the hotels had to pay the balance amount (different between 70 percent and the actual occupancy) from their own resources thereby increasing their losses for almost a decade.
Because of low occupancy level during the last 10 years, four prominent hotels were closed down in Karachi alone. These included: Hotel Metropolis, Midway House, Hotel Plaza International and Hotel Embassy.
THE PHA EXECUTIVE MEMBERS BELIEVE THAT:
(i) the bed tax is unconstitutional. With the introduction of 15 percent GST this should have been abolished as per the decision of the federal government that all provincial taxes will stand eliminated.
(ii) the bed tax authority has been unfair with the member hotels as the assessments are being made arbitrarily without any justification.
(iii) appeals on these assessments are not being heard by the Secretary/DG, Excise & Taxation despite continuous follow-ups.
(iv) this predetermined motivation could be explained from the fact that the 2004-05 financial assessments have not come to a logical conclusion.
The Excise & Taxation Department forces the member of PHA to fill up their HT-1 forms for 2005-06 which would again be assessed in an unfair manner thereby putting pressure on the financial resources of the hotels, and
(v) PHA members have decided to seek justice from the Supreme Court of Pakistan against the arbitrary and unfair assessment orders passed by the E&T Department in the recent past.
PHA members said that the action by the provincial government is contrary to the policies of the President, the Prime Minister, the Federal Government and the Sindh government, who are exerting all their efforts in bringing foreign investment particularly in hotel industry.