Bed tax's introduction stalled by court injunction

The government's plans to introduce a new bed tax on tourists has been temporarily blocked by the courts after the Chamber of Commerce, together with seven companies which depend on the tourism industry, took out an injunction against the government.

Legal Notices 174 and 175 of 2016, by which the 50c tax per night per tourist over the age of 18 years, capped at €5 per visit, were enacted into law had been published on May 20 and will come into effect on June 1.

The new law also requires operators to adopt new administrative procedures including the keeping of detailed records of the services provided, a report on which must be filed every three months.

The Federation of English Language Teaching of Malta (FELTOM), the Federated Association of Travel and Tourism Agents (FATTA), the Professional Diving Schools Association (PDSA), the Malta Association of Hotel Executives (MAHE), Joseph Attard, Divesystems WS Ltd and Toro Company Ltd filed the application for the injunction together with the Chamber of Commerce in the First Hall of the Civil Court, earlier today.

The plaintiffs, all small to medium-sized enterprises who represent a substantial chunk of the local tourism operators, point out that 53% of English language students who come to study in Malta are over 18. Of these, 30% reside with one of the 1000 host families registered with the MTA.

The plaintiffs are arguing that the sudden introduction of a new eco-tax was going to hit the tourism sector hard and jeopardise Malta's appeal to the sector.

It is standard industry practise for them to take bookings and payment well in advance of any arrivals, argue the operators, who point out that 44% of tourist visits to Malta are part of package holidays whose prices are established months in advance. This all means that the cost of the immediate implementation of the legal notices will have to be absorbed by the operators as they cannot be passed on to the consumer retroactively. The considerable additional administrative load also threatens to overwhelm and discourage small operators and host families.

The English language school sector, which employs over 1500 persons, had already been threatened with cancellations by host families who had already signed agreements with schools, claim the plaintiffs.

The wording of Legal Notice 174/2016 widens the scope of the law to apply to every household which “provides accommodation, whether against payment or not.” The upshot of this, argue the plaintiffs, is that even holiday visits by friends and family would technically be subject to these obligations.

As the eco-contribution is by its nature, a tax, the plaintiffs fear that any criminal responsibility for failure to collect this tax – particularly due to the contracts already signed - will now fall squarely on their shoulders and that of their employees.

The plaintiffs rued the fact that they had been “completely excluded” from the process of drawing up the subsidiary legislation. The government should have carried out an impact assessment on all parties which would be affected by the new law, say the operators.

Quoting the Small Business Act, they argued that the enforcement of such a law could only begin after two months from its enactment, but in this case operators had only been given ten days to bring themselves in line with the new legislation.

Lawyer Simon Galea Testaferrata signed the application.