Over-regulation will kill SA’s hospitality sector

Marc Wachsberger, md of The Capital Hotels and Apartments, shares his thoughts on the tourism and hospitality sector within South Africa.

There’s an interesting battle going on in the tourism industry, with the Tourism Amendment Bill gazetted on 12 April 2019 including amendments that are set to impact the home-sharing economy made possible by platforms such as Airbnb. The amendments include limits on the number of nights a guest can stay in a paid-for home share, how much a host can charge for accommodation, and there are zoning implications too.

Getting caught in over-regulating an industry that’s helping ordinary South Africans make ends meet is unwise – small businesses do not need even more red tape, obstacles and regulations to make it even more difficult for them to operate – there are too many of those already.

However, our economy is in a dire state, and the government has massive work ahead if it’s going to right the wrongs of the past – for which it’s going to need money, collected via taxation. At present, there is no way for SARS to collect any form of taxation from home owners that list their properties on platforms like Airbnb. They mainly operate under the radar, avoiding paying VAT on bookings, commercial rates and taxes, PAYE for staff, or any form of income tax and tourism levies.

Any other formal hospitality business is liable for all these taxes, which add significantly to their overheads, and just as any other business in South Africa is compelled by law to contribute to the fiscus via taxes, so too should Airbnb properties be subject to the same requirements.

The ‘Amsterdam model’ is an alternative to the proposed over-regulation in the home-sharing economy. In Amsterdam, Airbnb collects an occupancy tax on behalf of the government when each booking is made on the platform and pays it directly across to revenue services – there’s no onus on the Airbnb operator to get involved with submitting returns or making tax payments.

An occupancy tax of 20% to 30% would be a start toward levelling the playing fields and contributing to the fiscus.  This approach would add much-needed revenue to the fiscus at a time when South Africa needs to do everything possible to avoid junk status in investors’ eyes.

Local Airbnb operators that are VAT-registered should be able claim back VAT to ensure the occupancy tax does not result in a double payment to SARS.

South Africa’s increasing popularity as a tourism destination means that there is sufficient demand for a wide variety of accommodation options, including hotels, apartments, and home sharing models.

Government’s investment into marketing the country, improving its infrastructure, and building new and exciting tourism opportunities, benefits all hospitality stakeholders – and it is simply logical that all stakeholders should contribute to the tax base that makes this all possible.