U.K. Moves Forward with Hike in Air Passenger Tax
Gay Nagle Myers, Travel Weekly, 7/16/2009 (excerpted)
The U.K. plans to forge ahead with an increase in its air passenger duty (APD).
The measure went before the House of Commons on July 7, when it was approved over the objections of many members of Parliament.
Under the new rule, the British government will introduce a four-tier banding system, with the tax amount based on the distance between London and the destination's capital city. The U.K. says the tax is an environmental measure that offsets airline emissions.
The Caribbean region falls into Band C (4,000 to 6,000 miles from London), making the tax on flights from the U.K. to the Caribbean more expensive than on flights to Hawaii. (Hawaii is in Band B because the U.S. capital, Washington, is 2,000 to 4,000 miles from London.)
The measure takes effect Nov. 1. Economy customers will pay 50 British pounds (about $82 at current exchange rates) per ticket on flights to the Caribbean, up from 40 pounds. Passengers in premium cabins will pay 100 pounds, up from 80 pounds.
In November 2010, the tax for Caribbean travelers will jump to 75 pounds per economy-class ticket and 150 pounds per premium-class ticket.
Caribbean officials are protesting the inequity of the increase. They have been seeking to have the Caribbean region designated as Band B, the same as the U.S.
U.S. travelers will pay an extra 5 pounds per economy ticket (from 40 to 45 pounds), starting Nov. 1. Premium passengers will see the tax rise from 80 to 90 pounds.
The tax for U.S. economy and premium travelers will rise to 60 and 120 pounds per ticket, respectively, in November 2010.
The U.K. is the only country that has an APD. The November increase is on top of a doubling of the APD two years ago.
The Netherlands introduced an air passenger tax in July 2008 but abolished it last month.
Higher Meal, Hotel Taxes in Works
Menino says city needs revenue
Milton J. Valencia, Boston Globe, 7/22/2009 (excerpted)
A longtime proponent of what is known as the local option tax, Mayor Thomas M. Menino is invoking a new authority to further tax hotels and restaurants, saying the city needs to find fresh sources of revenue during what has become the worst financial time in recent memory.
The mayor plans to meet with representatives of the hotel and restaurant industries today to discuss a proposed package that would raise the hotel tax another 2 percentage points, to a total of 14.45 percent in state and city taxes, and the meal tax another .75 percentage point, to 7 percent. The new taxes, which would go into effect Oct. 1 if passed, are in addition to existing levies that are scheduled to increase next month as part of the state budget. The mayor's proposal is expected to be sent to the City Council next week for approval.
Dot Joyce, the mayor's spokeswoman, said the tax package is needed as an alternative source of revenue because the city already overburdens property owners and state funding continues to dwindle. More than $90 million in state aid was cut from last year's budget, she pointed out.
Joyce said that Boston, even with the proposed tax increases, would still have a low rate compared with similar-sized cities. For instance, the meals tax in Chicago is 10.25 percent, and that city's hotel tax is 15.40 percent, according to Boston figures.
Michael Ross, president of Boston's City Council, said last night that he expects the proposal will have the council's support, because the city needs to find ways to raise revenue beyond relying on state funding and property owners. He called the tax increase worthwhile for the outcome it will have in preserving city services.
New York City Enacts Tax on All Resellers of Hotel Rooms
Michelle Baran, Travel Weekly, 7/27/2009 (excerpted)
Opponents of a recently enacted hotel reseller tax in New York predicted last week that the measure would discourage travel sellers from booking rooms in the city and thus exacerbate the deep slump the Big Apple is seeing in its hospitality sector.
The reseller tax, enacted last month as an amendment to New York's Hotel Occupancy Tax, requires that anyone who resells a New York hotel room remit a tax based on the full amount paid by the customer, including any service fees or charges.
Under the merchant model, online travel agencies have until now paid taxes only on the amount they pay the hotel for a room; they have paid no taxes on the markups they charge consumers. Travel agents have never paid a hotel tax on service fees they charge consumers for booking a room or on commissions the hotels pay them for bookings.
"The provisions of the law are not limited to online travel companies," Elizabeth Thomas, media specialist for the New York City Law Department, wrote in an email. "All payments made to travel intermediaries as a condition of occupancy, including booking fees, will be subject to tax."
The new provisions signed into law by Mayor Michael Bloomberg on June 29 are scheduled to go into effect on Sept. 1.
The new law requires that a tax be imposed on the net amount paid for any hotel room booked by a "room remarketer." The ordinance defines that term to mean "any person, excluding the operator, having any right, access, ability or authority, through an Internet transaction or any other means whatsoever, to offer, reserve, book, arrange for, remarket, distribute, broker, resell or facilitate the transfer of rooms."
Based on Thomas' explanation, rent includes any additional fees or charges an online travel company, retail agent, tour operator or wholesaler charges for the transaction. It remains unclear if an agent's commission would be taxed.
The City Finance Division's report on the amendment offers this example: "Let's assume an online travel company rents a hotel room from a hotel operator valued at $100 for $50. The same online travel company subsequently charges consumers $80 to rent the same room. The travel company [currently] will pay the tax on the wholesale rate of $50. … In this transaction, $30 remains untaxed. This bill seeks to correct this problem."
But according to travel associations, what it really creates is a host of problems for travel companies and, potentially, for New York's tourism industry.
"If we're talking about a travel agent who earns a commission on a hotel room and [the commission is] going to get taxed on occupancy, [then] the same commission is being taxed two times, as income and as a hotel occupancy," said Paul Ruden, ASTA's senior vice president for legal and industry affairs. He added that the same was true for any service fees or mark-ups agents apply to a New York hotel booking to generate income.
"Our view of the occupancy tax ordinances is that they're written in a way that captures things that were not intended," Ruden said. They are written, he added, by "people who don't know about the industry who just want more money."
Ruden said that ASTA got word of the amendment on June 26, only three days before the bill was signed into law.
Among the law's most burdensome aspects is a requirement that all hotel remarketers register with the city's finance commissioner by Sept. 4, within three days of the law's effective date. Within five days of registering, the finance commissioner will issue the remarketer a certificate of authority that will allow the remarketer to charge customers the additional tax. There is no charge for the tax certificate.
"The law, as written, could affect everything from your small mom-and-pop agency to the largest travel companies on Earth," said Andrew Weinstein, spokesman for ITSA. "That includes not only the financial costs associated with the tax but the logistical cost; those could be significant burdens. This law may have been passed without adequate review, given the significant negative impact it could have on tourism to the city."