Accommodation tax should apply to all businesses that benefit from tourism ~ Opinion

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By Brian Tapley

I think more discussion and information is needed before we add another tax.

The tax as proposed will be applied to what is commonly called “roofed accommodation” and you can read this as all the hotels, motels and resorts in the area. Why this group you may ask?

We are a relatively small group, easy to find (we do a lot of our own advertising already) and we keep records since we are a business and thus, we are easy to find and audit. We are locked to the ground we operate from and cannot move like so many professionals nowadays can do, to any spot on earth with internet connections. No we are fixed in place, well advertised now and easy to find. A very easy tax target.

Before I ask some questions please know that I am in Lake of Bays and thus do not have to collect this tax…. yet! I don’t agree with the tax, especially the way it is proposed, but I fully expect that once the politicians get a breath of dollars from any new tax they will become addicted.

Assuming these accommodations collect this new tax I have a few questions as follows:

1- From the Doppler article, I note that the revenue may be significant, at $750,000.00 per year. How this was calculated is left out of the article and would be interesting to know.  My understanding is that the actual tax will fall in the 2 to 4 percent range but it could be different and it could change with time. The future is unknown.

2- As yet there is no definition of how the funds will be managed. This will arrive maybe at the December 2018 council meeting. It is proposed that 70 per cent of the funds will be controlled by the “new tourism entity” and the remaining 30 per cent would go to the Town for them to use, hopefully enhancing the tourism industry in the area. (but with no guidelines to date as to how this is to be done).

3- Nobody talks about the costs of collecting and accounting for this tax. This money does not just magically arrive where needed. Business must collect and account for it and remit it to somebody. That somebody has to account for it and produce records. Someone/group will also have to establish budgets and then actually go ahead and organize the expenditure of these funds. All this takes a person (or several) and time. These activities need to happen someplace, commonly called an office, and there will need to be space, filing and computing equipment.

4- Unless you wish to operate like Trump, all this activity will need to be audited occasionally and annual reports issued at annual meetings requiring a venue and so on. Everybody gets paid and they are all going to be “professionals” so this cost will be significant! It will come out of the tax revenues so right away a significant portion of this tax is going to be used for administration, not promotion.

5- In theory, perhaps, maybe, some of the existing funding to places like Muskoka Tourism can be taken up by these new funds to free the District from its current obligations of funding this group.

6- Nobody is talking about the Provincial funding for things like Explorers Edge (RTO-12) (which stands for Regional Tourism area 12 of Ontario in case people don’t know)

For things like 5 and 6, the current funding is all organized and in place. One wonders if this new tax will simply increase funding for these existing promotional groups, or will it fund an entirely new structure of bureaucracy to operate in competition to these existing groups? Again, nothing much has been said about this.

7- Another thing to consider is the effect on existing tourism promotional organizations, such as Resorts Of Ontario (ROO). These people have been working, Ontario wide, for over 40 years to promote tourism in our Province, locally and overseas. They work mostly funded by members who advertise. They are just one of several groups. Will they now be in competition with a tax funded, quasi government, advertising agency?  Is this fair?  How will the two groups be integrated successfully?  More questions.

NOW WE GET TO THE ELEPHANT IN THE ROOM

8- As Jesse Hamilton from Deerhurst correctly points out, “It’s what we see as the greater good of the Town and also drive guests not just through our doors but into restaurants, the retail space and all those things the town offers to them.”

Indeed this is very true. Tourists, be they short stay itinerant or even cottage owners who visit for several months a year, drive ALL BUSINESS in our area. Everything from Walmart on down through all the little convenience and souvenir stores and on into the repair and renovation business that caters to these cottage owners will benefit.

So my question is, if these benefits accrue to every business in the area in one way or another, why are only the hotels, motels and resorts funding this plan?

9- Another issue is that of what are called “Private cottage rentals”. This is the realm of groups like Airbnb,  Cottages on the Web, Waters edge rentals and a host of others limited only by the imagination of the internet and gullibility of the consumer, both of which one should not underestimate. These private cottage rentals, many are for short term, operate essentially exactly like what I call a “virtual web-based resort”.  This is that they cater to the same market,and offer cottage rentals just like many resorts such as ours do. The main distinguishing feature is that traditional resorts usually offer other amenities and on site staff to help and look after the guests.  Private cottage rentals may offer a large fancy cottage but seldom do they offer anything close to the plethora of amenities and activities of a place like Deerhurst for example.

The problem is that this proposed tax does not, in any way get collected by these type of rentals.  As a matter of fact, in almost all cases these private cottage rentals don’t collect HST, do not have to provide tested water, may or may not have rental insurance, proper fire alarms, any on site staff  and so on… the list is long. In a lot of cases the income is not even reported by the cottage owners so the government is not making even income tax from these rentals. But here is the “elephant”.  These type of rentals are significantly greater in total than are the activities of traditional resorts, even including places like Deerhurst and Red Leaves, two very large resorts indeed.

This brings me to my main thought for this letter.

If this tax is going to be of such benefit to so many people and businesses then why not apply a much lesser tax, maybe even just a part of one per cent, (so low as to be almost invisible on any one person’s  bills), but apply it to everybody who benefits and this would be essentially all the local business operations. If we are trying to be “fair and inclusive” this would generate the same or even greater revenue and the contributors would be the ones who benefit, not just the easy targets.

This is not a perfect solution, but worthy, I think, of consideration before we leap into the current proposed tax.  There are a lot of issues not yet solved, some not even discussed and there is going to be a lot of money floating around. Money floating around tends to attract not outright “con artists” but there are ways to sort of bend the accounting a bit and we have seen this in several charities over the years. We don’t want to go down this road at all. To prevent this the entire system needs to be thought our and made clear to all who participate or benefit from this tax. So far this is not the case.

10- A final, almost a footnote type of consideration is that most “resorts” are built on what is considered to be “desirable” land. This is land of relatively high value and it is because of history and the fact that tourists, let’s face it, want to stay on a prime piece of property. Nice exposure, breezes off the lake, sand beach, space to hike and golf and things like this are all in high demand from tourists so this is where resorts get built.  This is the same set of criteria for private cottages. Again you want your cottage in a “nice” place, not facing north into a mosquito infested swamp!  These conditions are recognized by a group called MPAC, ((Municipal Property Assessment Corporation). This is a very inscrutable group, who hide behind multiple web sites and who produce a valuation of your property, a valuation upon which the municipality in which you live will calculate your taxes. You all know how nice this feels each year.  These assessment people use an algorithm that takes into account a whole bunch of factors (probably including what Elon Musk had for lunch) to work out the value of your land and buildings. Guess what! Resorts, due to their highly desirable locations usually have a high valuation and thus already pay relatively very high property taxes to the municipality. Adding an accommodation tax is just one more straw to carry.  The high property taxes, all the usual costs of business, the HST and now an accommodation tax all add up and all get added to the final bill.  There is a point where the customer will simply “go elsewhere”.   Just this week, I had some customers who went out to dinner in Huntsville and their comment was, “it was good but for two people it was not $160 good!” and guess what… they won’t be going back to that restaurant again.  One can squeeze just so much before things start to run dry.

Brian Tapley is an accommodator who runs Bondi Village Cottage Resort in Dwight. Bondi has been in the Tapley family for 113 years.

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5 Comments

  1. Peggy Peterson on

    Well said Brian, you are right about all of this. Far more consideration is needed and a real local solution for the issues you have mentioned . Thank you for taking the time to explain this to people of Huntsville and area.
    The point again appears to take more money from small businesses in the area ….

  2. Brian has applied his logical engineer’s mind to the accommodation tax issue to produce a comprehensive discussion and a very logical solution. The benefits of tourism apply to many businesses; the rising tide of tourism dollars help to lift many boats of varying sizes from Canadian Tire to the small gift shop or restaurant. All benefit .

    One question Brian left out was the private cottage rental business and zoning law. Yes, the the largest resort in Muskoka is the “virtual (on-line)resort” but not all of the 2000 cottages in Muskoka are rented. However, an increasing number are not only rented out through on-line rental agencies such as Air B n B, more and more are “crossing the line” from “traditional ” cottage rentals (to help defray annual costs) into becoming pure businesses. Such “businesses” are operating in residentially-zoned water-front properties. These businesses have all the tools that Brian uses to run his resort; reservation charts on line; deposit policies; cleaning policies; linen policies; refund policies; This is occurring in the public domain on line and yet the Huntsville Planning people apparently do not recognize that fact.

    Ironically, Air B n B has ASKED to be taxed in British Colombia and in Quebec. They know they are a business ! The British Columbia government has agreed to tax Air B n B as a business. What a great source of income for that government. But the approach in Huntsville apparently is, as Brian has pointed out, to target the resorts and hotels. Even more astounding is the fact the it is the Huntsville hotel managers who are ASKING Huntsville to help tax their customers more than hotels in the rest of Muskoka !!!!

    This problem needs province-wide action. Many municipal governments in Ontario collect “accommodation fees” ; Huntsville hotels propose an “accommodation tax”; BC and Quebec have apparently solved that aspect of the problem. Good for them!

  3. This is, in general, an extremely well explained, cogent argument. The two items with which I was not in total accord was the “universal” accommodation tax; and the potshots at MPAC.
    .
    As explained, tourists and locals would be liable for this tax everywhere. We already pay high property taxes for living in this beautiful region; and now we should incur an additional barely noticeable tax, in order that the tourists aren’t missed. How can it possibly be fair for us to subsidize them, when their numbers are approximately double ours, and their average income is considerably higher?
    .
    Secondly, MPAC does a necessary, but thankless, job. If you have a valid argument for a reduction in your assessment, you attend a hearing; they listen intently; and you get a fair adjustment (if warranted). I, personally, had my recreational, vacant land assessment reduced by 2/3. I am certainly far from the only one.

  4. I visited Ottawa this year. I paid the 4% tax on my room for 3 days. Although I had no choice in being there, I didn’t mind paying it. I spent money there, did the touristy things tourists do. It wouldn’t stop me from going back.

  5. Kathy Henderson on

    I’m getting tired of more money grabs. This just makes it more difficult for people on fixed incomes and low income that have to use a hotel. Just because tourists come to Huntsville don’t assume they are all rich. At least not yet. Soon it will only be the rich that can afford to come to Huntsville. I can barely afford to live here and I am going to throw this out there (and have nothing to back it up except for what I see) the people adding more and more taxes are the people that can afford them. The higher wage earners. Keep squeezing. Vacationing is for the rich.

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