(ECNS) -- The China National Tourism Administration and the China Tourist Hotel Association on Thursday warned the hospitality industry against price hikes when the value-added tax reform expands to the hotel industry next month.
Under existing taxation rules, a business tax is levied at a rate of 5 percent of the gross revenue of a business, be it a small or large one.
After the tax reform, hotels with annual sales less than 5 million yuan ($772,000) will be subject to an "easy taxation" method: 3 percent VAT on their sales, lower than the original 5 percent business tax.
For those with annual sales higher than 5 million yuan, a 6 percent VAT will be collected. The rate is nominally higher than the previous 5 percent, but considering hotel operators are allowed to use their costs in water, electricity, natural gas and consumables - as well as in fixed-assets, housing renovation, maintenance and other outsourcing services - as deductions, the actual tax burden is reduced rather than increased, the authority said.
As the new round of VAT reform takes effect on May 1, the tourism market will also enter a peak season. The watchdog warned tourism companies, including hotels, against raising prices. Tourism regulators at various levels will improve their services, enhance supervision and guide hotels through the adjustment so that they can safeguard their rights and interests according to law.
