Postcard from Bishkek

The other day I was sent a link to a news article that I hadn’t seen before even though it was a couple of weeks old and it’s a page that I frequently look at given my background in Mathematics and Statistics.

As I run a couple of hotels, my correspondent thought that it might be of interest to me … he was correct … it was … at least, it was at first glance … but then I began to feeling myself getting more and more frustrated by it.

The  featured “Figure of the Day” on the Vecherniye Bishkek website on 13th March was 23796000 – apparently that was the amount of taxes (in soms – that’s about half a million dollars) paid to the budget by the hotels in Bishkek last year … or was it?

I confess that I found myself confused … not so much by the detail that it gave, (and it did give some interesting facts and figures, albeit in a narrative form where a table or diagram might have been more helpful) … but by what was missing.

The report giving the background to this figure told us that the capital has 165 “guest houses” providing accommodation services and they broke down to:

• 79 hotels – presumably, (although this wasn’t actually stated), operate under the general tax regime, paying the full gambit of Corporation (or Profit) tax, VAT (Value Added Tax), Sales Tax, Land Tax, Property Tax and Garbage Tax (not forgetting income tax and contribution to the Social Fund)
• 18 individuals who paid what’s called the single unified tax – a simplified system of taxation and presumably operate small hotels or guesthouses offering Bed and Breakfast, (although that wasn’t actually specified) and
• 68 individuals who purchase what is called a “patent” – a one off payment that works on an assumed income and then releases the entrepreneur from having to keep accounts and make reports, no matter if they make more or less than this sum.

It then went on to give a breakdown by rayon – or district, (Bishkek is divided into four administrative Districts: Leninsky, Pervomaiskiy, Oktyabrskiy and Sverdlovskiy), and the narrative gave a breakdown as to how many “gostiniziy” there are in each district and the amount of taxes they paid … here’s the data in summary:

Bishkek	No	Tax payer	Tax Basis	Taxes paid
				KGS
	68	individuals	patent	2267400
	18	individuals	single tax	282600
	79	hotels	taxes	21246400
Total	165			23796400
Leninskiy Rayon
	7	hotels	taxes	4438000
	17	individuals	patent	280500
	6	individuals	taxes	173300
	1	individuals	flat tax	52600
Total	31			4944400
Pervomaiskiy Rayon
	9	hotel	taxes	10693100
	15	individuals	patent	140700
	8	hotels	taxes	567900
	7	individuals	single tax	119800
	1	hotel	single tax	64000
Total	40			11585500
Oktyabrskiy Rayon
	3	hotels	taxes	3900100
	8	individuals	patent	260900
	15	individuals	taxes	176000
	9	individuals	flat tax	46200
Total	35			4383200
Sverdlovskiy Rayon
	7	hotels	taxes	973100
	28	individuals	patent	1585500
	24	individuals	taxes	324700
Total	59			2883300

The sting came in the next couple of paragraphs:

• these figures do NOT  include the larger hotels like the Hyatt Regency, Ak Keme and other hotels, (including, I might add, our hotel the Silk Road Lodge), as they pay taxes to the Large Taxpayers Unit, and not to the Rayons …  and also
• because, at least, “according to some reports”… “the majority of facilities that provide hotel services in the capital are not registered, mostly those that provide daily and hourly accommodation”.

So the statistics are not complete … which led me to ask myself, what was the point of publishing them?

It’s not as if the missing information is negligible and can safely be ignored … I don’t know the figures for the other large hotels, but our tax payments last year amount to a considerable percentage of the tax paid in our particular rayon according to these figures … and the Silk Road Lodge is a considerably smaller operation than some of the other hotels mentioned … which suggests to me that the hotel industry is actually contributing far more to the budget than is indicated here.  How much more, is hard to estimate.

They also seem to compare different things.

Although the term used in the report, “gostinitza“, is indeed used to refer to a Hotel … there is another word that has crept into the language – a “borrowed” word: “‘Otel“.  One reason for this is that the term gostinitza is also used for any place which is rented out for temporary accommodation – for example, an apartment given for rent … or a room “rented by the hour”.

They did, however, present us with some interesting information.  To be honest, although I was aware that the number of  competitors has increased, I didn’t know there were that so many “hotels” in Bishkek, (“… I am going to have to do some more research … and update my list!”, I thought to myself).   In fact, (as it became clear in the final paragraphs), this is actually an understatement … there are in fact even more!, if only a few more actual hotels as opposed to “rooms for hire”.

I was intrigued as to what was meant by the phrase “flat tax” that someone in Leninskiy rayon pays … but that wasn’t explained.

I was intrigued to see that those who buy a patent pay more than twice as much to the budget as those who operate under the simplified single tax regime – 33344 som on average compared to 15700 – which I presume is partly due to the fact that the fee for the patent for those who rent out apartments is based on the amount of rent charged rather than on the turnover.

It is clear that although there are more establishments in the Sverdlovskiy district,  it actually receives the smallest amount of tax revenue suggesting smaller and cheaper accommodation, whereas the Pervomaiskiy district brings in almost almost half of the tax revenue from the sector, the nine hotels contributing an average of almost USD25000 each to the budget.

It would have also been nice to have seen, amongst other things:

• which taxes are included – I am assuming they don’t include the payroll taxes, (income tax and social fund payments), but do include all the others …
• the total amount of tax raised to see what proportion of the local economy is accounted for by yher “hotel industry”;
• the total number of beds/rooms covered by these statistics;  A hotel is likely to have a larger number of rooms than a guest house offering “Bed and Breakfast” and a patent may simply cover a single apartment.

Tags: Business, Expat, Life_in_Kyrgyzstan, Statistics, Tax, Tourism