Saturday, 17 June 2017


Nobody likes paying taxes. The word "tax" is obnoxious together with the words tariff, levy, excise and duty. Many think that they are paying too much taxes and that the government has introduced too many taxes on too many things.

The recent introduction of tourism tax that's scheduled to be implemented starting 1st of July is not short of controversy. Opposition to the tourism tax is fairly well-distributed across Malaysia political spectrum be it from government side or opposition side. Majority of Malaysians, at least the ones I saw online, are against this new tax.

Among the reasons why those people are against the tourism tax are:
  1. It will burden Malaysians - domestic tourists
  2. It will discourage foreign tourists to visit Malaysia
  3. Hotel operators will be negatively affected as tourist arrivals drop
  4. There are already other taxes and fees that have been imposed on tourists and hotel operators
It's imperative for us to at least know some facts before we reject this new tax brought upon by the government.


Tourism is undoubtedly among the major contributors to Malaysia's economy. In 2015, tourism industries contributed RM166.5 billion to Malaysia's gross domestic product (GDP) or represented 14.4% share of Malaysia's GDP. 

Performance of Tourism Industry: Tourism Satellite Account 2015: DOSM
In 2015, foreign tourists spent RM74.1 billion in Malaysia of which RM17.6 billion or 23.7% was spent on accommodation. 

Inbound Tourism Expenditure: Tourism Satellite Account 2015: DOSM
Meanwhile domestic tourists spent RM60.5 billion of which RM6.1 billion or 10.1% was spent on accommodation.

Domestic Tourism Expenditure: Tourism Satellite Account 2015: DOSM

Tourism industry employed 2.91 million persons and contributed to 20.7% of total employment in Malaysia in 2015. Accommodation services employed 199,000 persons in the same year.

Employment in the Tourism Industy: Tourism Satellite Account 2015: DOSM


According to Domestic Tourism Survey 2015 by Department of Statistics Malaysia, less than 20% of domestic tourists in Malaysia stayed in hotels for their trips and close to 70% stayed in friends and relatives' house. The rest stayed in homestay, apartment, chalet and rest house.

Domestic Tourists Type of Accommodation: Domestic Tourism Survey 2015: DOSM
The bottom 40% (B40 - monthly household income less than RM3,860) household income group spent just RM12 per year on accommodation, the middle 40% (M40 - monthly household income between RM3,860 and RM8,320) household group spent RM72 per year while the top 20% (T20 - monthly household income more than RM8,320) spent RM648 per year on accommodation.

Komposisi perbelanjaan penggunaan isi rumah mengikut kumpulan pendapatan isi rumah, Malaysia, 2014: DOSM
This is consistent with the data earlier that most domestic tourists chose to stay with friends and families during their trips. Those in the T20 and some in the M40 can afford to spend their money on 4 - 5 star hotels and will be affected by the tourism tax while most in the M40 and B40 are unlikely to be affected.

Numbers of domestic tourists who stayed in homestays during their trips are also increasing every year. In 2007 only 45,354 chose to stay in homestays and in 2016 that number grew to 353,344. Not only that homestay will be exempted from tourism tax, it's also cheaper and more affordable for most people.

Statistik Homestay: Kementerian Pelancongan dan Kebudayaan Malaysia
Based on the figures above, I would say Malaysians or at least those in the lower middle and bottom income group wouldn't be affected by this new tourism tax. If you can afford to pay 10% service charge to hotel operators, what is RM20 per night (5-star hotels)?

Furthermore, foreign tourists spending (RM17.6 billion) made up 3/4 of total spending on accommodation compared to domestic tourists spending (RM6.1 billion) on accommodation. That means more tourism tax will be collected from the foreign tourists than domestic tourists.


Since 2014, government revenue has been plummeting due to falling commodities prices mainly crude oil and natural gas which are one of the main contributors to government revenue in the form of petroleum income tax, Petronas dividends, royalty, crude oil exports duty etc. Even with the introduction GST since the 2nd quarter of 2015, it still could not cover the shortfall resulted from the drop in petroleum related revenue.

Federal Government Revenue and Expenditure: BNM
Since 2014, government revenue has been dropping every year and in 2016 government revenue was RM8.2 billion less than it was in 2014. Correspondingly government spending decreased by RM7.2 billion in 2016 compared to 2014. That means budget cuts for everyone including the Ministry of Tourism and Culture (MOTAC).

Ministry of Tourism and Culture Expenditure and Allocation: MOF

Allocation for MOTAC has been decreasing every year since 2014 from RM1.44 billion in 2014 to RM1 billion in 2017.

Tourism Malaysia

According to Tourism Malaysia, tourist arrivals and receipts declined in 2015 compared to 2014 when there was a bigger financial allocation to conduct various publicity and promotion activities.

The Star

While the minister of MOTAC said that the tourism tax collection will be used to promote Malaysia overseas, there's no guarantee that allocation for tourism will be increased next year as all government's revenue will go into a consolidated fund as stated under the Article 97 of our Federal Constitution. This is something that needs to be clarified by the government on whether there will be a new government trust fund for the purpose of tourism promotion and development in the future.


In 2015, there were 1.99 million foreign hotel guests in Sabah and 599,400 in Sarawak, this is in contrast with 9.34 million foreign hotel guests in Kuala Lumpur.

Hotel Guests by States: Tourism Malaysia

Both Sarawak and Sabah registered 4 million domestic hotel guests in 2015. That means hotel operators there depend on domestic tourists more than they depend on foreign tourists.

Sabah and Sarawak Hotel Guests: Tourism Malaysia

I'm not too sure if Sarawak and Sabah main concern is the effect on domestic tourist arrivals into their respective states because most of the arguments that I have read so far have been revolving around federal vs state jurisdiction, power et cetera. But I really hope federal government will increase allocation for tourism infrastructure and promotion and distribute them fairly to state tourism bodies especially Sarawak and Sabah where there are so many hidden gems and untapped potential tourist attractions.

Again I don't think an extra charge of RM2.50 to RM20 per night would affect tourist arrivals that much. Besides some state governments like Penang and Melaka have already been charging bed tax and heritage tax to hotel guests. For those who for some reasons don't want to pay this tourism tax to the government, there are always Airbnb and homestays which are not subjected to the tourism tax. As a matter of fact you might even get a better accommodation at a cheaper rate than those hotels.

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