The popularity of online services such as ‘airbnb’ has prompted many in the hotel and restaurant industry to apply pressure on unlicensed accommodation providers to have the same level of regulation.
This debate, which is happening all over the developed world, has attracted strong reactions from all sides. This newsroom spoke to a number of people who rent out their apartments for short-let and long-let holidays and asked them what they thought of more government regulation.
One particular property owner said that the biggest obstacle for stopping people from getting a license with the Malta Tourism Authority to rent out their home is the tax implications.
He explained that a form, called TA 24, allows for a property owner to pay a flat rate of 15% tax on their rental income, rather than paying it normally and ending up in the 30-35% tax bracket.
This used to be only available for long-let flats, therefore a number of property owners would choose not to declare that they have a flat which is being rented out for short-let due to the high tax rate he/she would have ended up paying.
A number of property owners said the same thing – that because this tax incentive is only available for long-lets, people are simply not applying for the licenses on short-lets, as that would mean no longer being allowed to make use of the 15% flat-rate.
“In general there has to be some level of regulation, there are many apartments which are shameful. The problem is the many tax implications behind it. What I don’t agree with is the fact that it is your property, you are getting paid rental income, you have much more cost to maintain, and this is one of the reasons why the prices are higher.
“You invite someone to stay in it for a holiday, for a price. As long as you are paying your taxes you are free to do what you like with it. The fact that it’s promoting Malta, yes there should be regulations to make sure the flats are liveable, however there shouldn’t be a difference in tax,” said one property owner.
Some research into the tax implications of short-let and long-let rentals however shows that this tax incentive was changed in order to cater for both types of letting, and not just long-let. The problem here is that many property owners had no idea about this. Even though the tax incentives should have been attracting people to get MTA licences on their accommodation, declare their short-lets and come into line, a lack of information prevented this from happening.
Apart from this, one particular property owner raised an interesting point:
“Many people who want to go into short-let rentals have no idea as to how successful they will be, whether they want to go through the hassle or whether it’s a short term plan or not. I would not go through the hassle of getting an MTA license for my holiday-rental flat if I do not even know how long I will be doing this for,” she said.
A number of property owners said that the only reason that they have licenses on their holiday homes, which comes with its own set of regulations, is fear that the government will suddenly begin fining people large sums of money.
“The list of things that need to be done in an apartment, are already pretty much there. I can’t imagine doing much more,” one person said.
“Regulation has to involve more team work: regulate me, give me guidelines, give me tax incentives and come and check if everything is ok, which fair enough. At a point the MTA said that they employed a lot more people to check whether everything is fine, however they were putting articles to instil fear into people.”
“It’s true that there are substandard apartments – and I don’t agree with certain accommodation. If you are paying twenty euro a night however, you are going to get a place worth twenty euro a night,” one particular woman said – vehemently speaking against government regulation.
She added that a different type of tourist is booking a flat through a website rather than booking a hotel, therefore allowing this to take place is simply increasing bed-nights and the overall number of tourists, rather than taking any tourists away from the hotel industry.
From the speaking to a number of property owners however, it would seem that a significant portion are getting licensed and are getting themselves in line through the regulations there are in place today.
Tony Zahra – President of the Malta Hotels and Restaurants Association
President of the MHRA Tony Zahra has been quite vocal about the popularity of unlicensed accommodation – most recently stating that if they continue to go on unregulated, this will be bad news for hotels.
Asked to further explain his position, Mr Zahra said that:
“If you want to be in the business, you have to follow regulations like everyone else. A guest house, with about 20 rooms, is not very different from those who list two or three apartments for short let rentals”
“Let’s see what we have done with boutique hotels. There was no grading for them, mainly because there weren’t really any in the past. As time went by and more boutique hotels cropped up, we introduced a grading with some corresponding regulations. The same could be done for these unlicensed accommodations.”
“You must keep in mind, that at the end of the day, these tourists are paying for their stay. They are paying money in exchange for the accommodation, so certain standards are automatically expected when money exchanges hands.”
“We need to ask ourselves, what if somebody dies at one of these unlicensed accommodations? What if a fire breaks out? Tourists would say that Malta has no regulation when it comes to accommodation, and this will hurt our tourism industry. They would question whether Malta is really a member state of the European Union.”
“Another aspect is the introduction of a 0.50c eco tax contribution which was introduced this year. People who offer their unlicensed accommodation need to pay this contribution too. It only really works if everybody is paying the contribution. It is unfair that some are paying it while others get a free pass. These people are in the accommodation business, they are not accepting friends and family to stay at their place.”
“I have spoken to many relevant stakeholders and people in the industry. The bottom line is that we are not trying to stop the world go round, but if you want to enter the market, you need to accept some form of regulation – which applies to everybody, or nobody. If we do this right, and take advantage, the market could be regulated in a way that is good for everybody involved. We are not trying to stop technology, but we are trying to create a fair and even playing field.”