Value added tax (VAT) is expected to be implemented across the GCC countries by 2018, and this will “make everything expensive” and might dent customer’s perception of luxury travel, according to Mövenpick’s Andreas Mattmüller.
Mattmüller is the Swiss-operator's chief operating officer Middle East and Africa, and he spoke more about said at a press briefing: VAT makes things very expensive, Dubai is not a cheap destination. You [currently] have service charge of 10%, municipality tax 10% and every 5% is more than what it already is. They say it starts at the end of January, other people say it’s another six more months [after January].
“I know there is a system in place here in Dubai, where you can actually report it properly. I also know in Saudi Arabia there is nothing, so they have to do everything from scratch – how to capture it, port it and pay it to the government.
Mattmüller minced no words in conveying his sentiments towards the new taxation policy. “There are a lot of question marks, and obviously I wasn’t convinced to have it because it’s now +++,” he said.
He added that hoteliers would like to be in the know as soon as possible. “Ideally we would like clarification about everything, [and not just a single part of the potential framework]. How do we impose it? What goods will have a VAT charge? Is it breads or meat?
“We don’t have too much of information yet, it’s all very loose. It’s just May, so we still have another eight months. But we are watching it carefully,” he said.
Pre-empting customer behaviour Mattmüller shared his opinion on what sort of impact VAT might have. “If VAT is implemented everywhere, the customer will not have a choice, they will still want to travel. But we will see a shift from luxury and five-star to more mid-market, or from upscale to midscale.”
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