Iran’s Hoteliers Society is planning to call on the Majlis to remove the value-added tax (VAT) from rooms and grant hotels permanent exemption from income tax.
Speaking to Mehr News Agency, Jamshid Hamzehzadeh, president of the society, said the 9% VAT raises room rates considerably and harms the business and profit margins.
“This puts a stay at a hotel out of many people’s affordability, not to mention the fact that it also inflates the overall cost of a trip,” he said.
“We want the new Parliament to address the issue and put an end to VAT.”
Parliamentary elections are scheduled for February 26 with high expectations that the new legislature will bring in new faces that can help turn the economy around after years of recession, inflation, sanctions, poor management, declining productivity and absence of transparency not to mention foreign investment draught.
On the subject of income tax, the hotelier said the society will push for complete exemption from income tax. Last year, hoteliers were granted a tax holiday for six years, and 50% permanent exemption.
“We now want to apply for permanent tax-exemption status,” said Hamzehzadeh, who believes the move can boost domestic tourism.
Deregulation
He voiced dismay with the Iran Cultural Heritage, Handicrafts and Tourism Organization’s inclination to “interfere with hotel rates” and called for prices to be deregulated.
“Hotels do not provide basic services. Our business is with luxury. As such, prices must be based on supply and demand,” not according to what the government says or thinks is appropriate, Hamzehzadeh said.
Recounting the benefits of price deregulation, he said the move will lead to more reasonable prices, which can boost hotel occupancy rates.
“The reason we have a shortage of hotels is because private investors are not convinced that the business is profitable, so they take their money elsewhere. But once hotel bookings go up and hotels start turning profit, things will change,” Hamzehzadeh said.
Iran has 1,100 hotels and guest houses, including 130 four- and five- star hotels.
Occupancy rates declined by 15% in the first seven months of the fiscal Iranian year (March 21 – September 21) compared to the same period last year.
Iranian hotel owners have long complained about declining occupancy rates, and have attributed the drop to a variety of factors, namely the emergence of affordable vacation rentals.
A vacation rental is the short-term renting out of a fully-furnished accommodation — from a house or an apartment in the city to a cabin in the woods — by the homeowner. They are oftentimes seen as an affordable alternative to hotels, especially in a country like Iran where hotels are accused of overcharging and failing to provide services in accordance with their star rating.
In November, Hamzehzadeh led the hoteliers’ charge against holiday homes, launching a scathing attack against ICHHTO policy.
“The notion of quality [in vacation rentals], which are hardly creditworthy, is meaningless because they are not monitored by the ICHHTO.”
He warned against “promoting the culture of vacation rentals” and said prevalence of these types of accommodation is not in the industry’s best interest.
