Home / FT View/ Platforms and policy

Platforms and policy


Comments / {{hitsCtrl.values.hits}} Views / Thursday, 14 September 2017 00:00


Establishing regulatory frameworks for an industry can be tricky because technological advances can throw challenges that require nimble changes but they can only be made after much discussion. Sri Lanka’s tourism industry is facing such a challenge where the formal sector wants their counterparts in the informal sector regulated but such steps could hamper competitive inclusive growth. 

At present an estimated 50% of tourists that come to Sri Lanka stay in home stays, guest houses or apartments. The formal sector feels that since they pay taxes and those in the informal sector do not, the latter has an unfair advantage and is also hurting revenue. They believe for Sri Lanka to position itself as a high-end tourist destination the informal sector needs to be reigned in and more focus has to be given to the formal segment through international promotions, tax exemptions for capital investment and refurbishment as well as other assistance.   

Payment platform websites such as Airbnb and other forums are used extensively by the informal sector to provide a competitive offer to low and mid-range tourists. Unregistered room providers, the formal sector argue, are not legally expected to maintain standards and in the case of an accident could dent the overall reputation of the destination. For the Government the informal sector represents valuable tax rupees.  

While regulating the informal sector would result in improvements in service and management standards those stakeholders feel that being made to pay 14% of taxes would be both challenging and detrimental to their development. One of the reasons the tourism industry has become perhaps the most inclusive employer in the country is because the informal sector allows families or stay-at-home-moms and others from limited backgrounds to enter the sector. Many of them do not have the revenue for high capital investment but often provide competitive services that have allowed tourism numbers to grow steadily over the last eight years. 

Many in the formal sector agree that Sri Lanka is being priced out by their East Asian competitors but the existence of a robust informal sector actually helps to keep local prices modest and encourages higher volumes that are still relevant given that tourism dollars are essential to Sri Lanka’s economy. In managing the transition to a high-end destination policy makers have to be careful in maintaining the inherently inclusive nature of this structure, especially since more and more tourists are deviating from standard hotel stays and wants the different experience offered by the informal sector.   

Most tourism regulators agree that the first step would be registering the informal stakeholders but this is significantly hampered by taxes. Therefore one incentive could be to stagger taxes according to the size and other elements of the unregistered business. This will be tricky as most owners would do everything within their power to avoid paying taxes. Registration without taxation would allow authorities to rate and assign stars for those establishments. Imposing taxes, however, may have to come with incentives rather than penalties. 

Once the initial steps are comprehensively implemented then policy makers can consider other regulations. Singapore, for example, restricts tourists from renting apartments unless the stay is longer than a week; other countries are considering regulations for Airbnb operators. Yet the crucial point remains engagement and transparency because consumers should still have the power of choice.


Share This Article


DISCLAIMER:

1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.

COMMENTS

Today's Columnists

Great ‘Gamperaliya’: A great novel made into a great film by a great director

Saturday, 23 June 2018

‘Gamperaliya’ (Changes in the Village/Changement au Village) was the third feature film made by ace director Lester James Peries. It was released on 20 December 1963.The film was based on the famous novel of the same name written by the doyen of


Thushani takes Todos to new heights

Saturday, 23 June 2018

Thushani Rodrigo has always amazed me. From the very first day I met her, I have been in awe of her strength, courage and grace and constantly impressed by her creativity. The discipline and commitment she brings to her work, her farsightedness and h


Confusion in Maldivian opposition is to Yameen’s advantage

Saturday, 23 June 2018

The ongoing confusion in the ranks of the Maldivian opposition, barely three months before the presidential election, works to the advantage of the incumbent President and candidate of the Progressive Party of the Maldives (PPM), Abdulla Yameen.


Implications of inward FDI on China: Lessons to be learnt

Saturday, 23 June 2018

China overtook the United States to become the largest trading nation in the world in 2014. China is the second largest economy in the world behind the United States and the largest exporter in the world. It is referred to as the factory of the world


Columnists More