Postcard from Bishkek

When I was a boy growing up back in Malvern, we used to have a newspaper delivered to our home each morning: The Daily Mail.

The newspaper has a long and illustrious history.  Founded in 1896 by Lord Northcliffe, today it actually has Britain’s second largest circulation, after The Sun.  Although it was the first British newspaper to top a million copies, it wasn’t always like that.  I remember when it was a “broadsheet” and then, in 1971, revamped itself as a “tabloid” – smaller and more compact.

It was designed from the outset to be a mass circulation paper and was aimed at the new and growing class of “educated” which emerged from the introduction of compulsory schooling as a result of the Education Act of 1870.   Cheap and packed with competitions and gimmicks to attract readers.  Although it was always my father’s paper, it was known as “woman’s paper” and carried many features designed to appeal to women readers.

As a teenager I would pick up the paper and scan the contents, but I wasn’t that interested in it … it was a right wing “conservative” paper and although the stories and commentary always appeared to be logical and reasonable, as in most tabloids they were also usually short, highly selective and presented in a provocative and sensational manner.

Like most of our American cousins, (at least, according to some surveys), the first page I would turn to was the one with the cartoons, (“comics” in American).  The paper carried Peanuts, (by Charles M. Shultz featuring Charlie Brown, his pet beagle – Snoopy – and a host of other characters); Fred Basset, (featuring the wry sardonic comments of a Basset hound on life as a suburban pet); Flook (drawn by Wally Fawkes – aka Trog – short for Trgladyte – but written by such comic masters as Barry Took, Humphrey Littleton, and also George Melly and Barry Norman.  It ran from 1949 to 1984 and featured a young boy, Rufus, and an imaginary furry creature after whom the cartoon was named, who inhabited a satirical fantasy world populated by a range of larger than life characters who bore a striking resemblance to politicians and celebrities of the day – as well as the lovable villain, Bodger, and his sister Lucretia.)  There was also the infuriating “Love is …”cartoon – well, I found it infuriating, anyway.

It’s a long time since I left home and I have seen the paper only infrequently ever since.  Although I have seen their website – usually when they’ve carried a story about Kyrgyzstan such as the character sketches of the Jockey come tour guide Richard Dunwoody or the equine adventurer, broadcaster and businesswoman, Alexandra Tolstoy.  I was a bit surprised this week, therefore, when a link on newsletter took me to their website.

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The story this time wasn’t about Kyrgyzstan, or horses … but about Rome.  More specifically, it was about a new “Tourist Tax” that has just been introduced by the authorities in the Italian capital, ostensibly in order to help protect the city’s many monuments.

Tourists will have pay two Euro per person, per night, (for the first ten nights of their stay, … “how many tourists stay in Rome for more than ten nights?”, I wonder), if they stay in hotels classified as three-star rating or less, and three Euro if they have chosen four or five-star accommodation.  Even campsites fall within the remit of the tax: campers will pay just one Euro, (but only for the first five nights).  On the other hand, youth hostels are exempt from the charge, as are children under ten.

The authorities hope it will raise around eighty million Euro a year from the approximately thirty million visitors the city attracts each year – which suggests an average stay of just two or three nights in the city, perhaps over a weekend.

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Now tourist taxes are fairly common around the world – but they can also be a bane.

Amongst their attractions to the authorities are that they are, theoretically, easy to administer.  It’s like a poll tax – there’s a body, so you pay.   That’s not, however, always the case.

Rome, for example, has almost 4000 establishments offering accommodation.  Hotels and established bed and breakfasts, (or what would be homestays and yurt inns here in Kyrgyzstan), technically have to be registered for tax and inspected by the sanitary, fire prevention and other bodies, however, a large number of private houses also take in guests on Lake Issyk Kul and not all of them are as scrupulous about registering.  In theory that should be easy to control, but I fear that the result would simply be that a large number might well evade their liability.

The Romans have also chosen to introduce a flat rate tax, banded so that rates can take into account the type of accommodation.   This may be a good idea but, although simpler to administer, flat rate taxes do not really offer much differentiation even if they are banded.  A room in a five star hotel may cost a couple of hundred dollars or over a thousand …  and it seems to me that a percentage base might be preferable.

For the record: here in Kyrgyzstan, when we opened the Silk Road Lodge, there used to be a hotel tax … it was also a flat rate, assessed monthly – 3 som … per guest … not per guest per night.  It didn’t matter if you were staying in a “B&B” or a five star hotel; it was the same, 3 som.  (One hotel – I won’t name names -  used to charge an additional USD10 for the first night claiming that it was a tax issue … at that time the tax, 3 som, was probably worth 10 cents!).  It seemed to me at the time as a total waste of time – and designed simply to give the tax authorities something to check … so that they could find an infringement and issue a fine, (or extract a bribe).

Then the authorities decided to change the basis of the tax to a percentage of the cost of the accommodation, which immediately brought in a considerable increase in tax revenues for the authorities.  Our bill for this tax, for example, rose by fifty-fold and as we had included the tax in the price of the room, and didn’t charge the clients a separate sum, the burden fell entirely on us until the next annual price review.

One of the issues about the hotel tax that we constantly faced was what it actually covered … there cost of the room – OK, that’s obvious – but there was also a provision that it covered the cost of the booking.  So the cost of the booking fee charged by an agent was covered.  That’s the same situation which many local authorities in the US are trying to grapple with.  How do you collect these local taxes from companies who may be located out of your jurisdiction, even in another country.  Then there was the question of breakfasts.  Food and Beverage is not part of the accommodation – unless, so it was argued, it is included in the room price.  So, a breakfast included as part of the room rate was taxed, but one which wasn’t, wasn’t taxed.

When they were revising the tax code there were a number of suggestions for changes to the tax.  For example, one was to change the basis of the tax from the cost of the accommodation to the cost of the hotel services … all hotel services: meals, telephone charges, internet charges, fees for use of the sauna, “in-house” laundry or fees for any other additional services which a guest may choose to take advantage of … in other words, it would a percentage of the overall bill.  In one way that suggestion came to nothing because the hotel tax was abolished along with a number of other small, “nuisance” taxes … but as these were replaced by a general sales tax, in effect, it was adopted.

The authorities in Rome seem to have made the situation worse, according to the Daily Mail report, by requiring that the tax is paid on checkout, “in cash”.   Modern day travelers, used to paying for everything with a credit card, will need to remember to hold back a little paper money to take care of this additional “extra”.  The compulsory introduction of “cash” might also be an accounting problem – as it provides an open invitation for corruption and “cheating the system”.

When there was a Hotel tax in Kyrgyzstan, many hotels didn’t include it in the price of the room, (although we did at our hotels), but they added it onto the bill at the end of the stay.  This caused all sorts of problems with quests who objected saying that the quoted price was ‘x’, so why were they being asked to pay more.  It would be far better for the hotelier to simply include it as an element into the cost of the room.

What’s more, as the Romans have decided to limit the tax according to the number of nights, (although few people will stay long enough to take advantage of the “tax free nights”), it may make complications when it comes to calculating the bill as two different rates might well apply.

That’s not to mention the additional burden on the hotel’s accountants and bookkeeping system, and the associated cost involved to the business.

So, all in all, a hotel tax is not as simple as it seems.

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Another advantage, or attraction, of a hotel tax is that they the brunt is borne not by the local population but by the visitors.  In order to support visitors there needs to be additional infrastructure and it seems that they should contribute to it, and the full burden not borne by the local population.  In theory, the old hotel tax in Kyrgyzstan, being a local tax with the revenues going to the local authority instead of the general exchequer or some targeted fund, (for marketing the country and attracting more tourists, for example), did just this, although it is doubtful how effective it really was.

Then again, the revenues raised from tourist taxes, or hotel taxes, can be targeted towards a particular purpose, as in this case.  There was once a suggestion to introduce a Tourist Tax, (or Hotel Tax), here in Kyrgyzstan which would be used to pay for marketing the country abroad in order to attract more tourists.  The suggestion was never implemented, however, mainly because at that time their already was a hotel tax, a local tax with the income going to the already impoverished local authority.

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Now, it is true that the additional expense incurred by the tax won’t necessarily add a lot to the overall cost of the holiday, (the report compares it to the cost of a cappuccino), and, of course, the actual rate can be set at differential levels depending on the type and/or cost of the accommodation.  However, “what a person is prepared to pay” has always struck me as a dangerous argument when considering setting a price and, unfortunately that seems to be an argument that I come across quite frequently – whether it be from a taxi driver or a hotelier.  I also think it is close to immoral.  It seems to me that it shouldn’t be a question of “how much can we get away with?”, but should be “how much is it actually necessary to raise and how can we achieve this?”

Of course, what people are prepared to pay is an issue that needs to be considered.  After all, such additional sums, (no matter how small), do increase the overall cost and sometimes, (especially given these figures of one, two or three Euro – or 60, 120 or 180 som), they can be quite significant when compared to the prices charged by some establishments.  As one hotelier in the report put it, “Tourism is our main income and prices in Rome are already high enough, so although it appears only a small increase, for a family on a break in the city it will add more to the final bill and be noticed.”

What is more, the additional expense, no matter how small, can be the equivalent of “the final straw” which encourages the tourist to forget or overlook a particular destination as too expensive and propel them towards one which appears cheaper.

In the case of Rome, of course, there are a number of attractions which will draw tourists.  As another person quoted in the report put it, “I don’t think it will stop people coming to Rome.”  Rome is Rome – there are lots of reasons for choosing to visit Rome, what with its numerous historical, cultural and other associations.  It was the seat of the Roman Empire.  It is the home of the Catholic Church.  It is in Europe’s “backyard” with easy access for the millions who live there.  Visitors may not notice a few extra Euro on the cost of the trip in the course of time … but that’s not true everywhere.

Some destinations are very price sensitive.  We are constantly being told, for example, that the cost of a holiday in Issyk Kul is too expensive for the typical guest from Kazakhstan or Siberian Russia – especially when compared to the cost, facilities and level of services available in places like Turkey and Thailand.

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So, all in all, I am glad that our hotel is in Bishkek and not in Rome.

But I do have to thank the Burghers of Rome for one thing … their decision has brought back a number of happy memories mulling over, for example, a strange unidentifiable, shape shifting, satirical, imaginary, furry creature from my youth.

What a Flook!

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PS - I looked for a copyright free image of Flook so you could see what I was getting excited about … but can’t find one, so, I’m sorry about this, you’ll have to google “Flook cartoon” for yourselves … or you could just click here, … this gives a lot of other, unrelated, images but quite a few good ones of the whimsical character – including a link to a post which includes an explanation of the origins of Flook.

Tags: Business, Expat, Reminiscences, Tax, Tourism