Hoteliers seek new rules to narrow inequities, say changes still leave uneven F&B treatment

The new rules on the application of the local tourism tax entered into force yesterday, but the promised correction of inequities among different types of operators in the Food and Beverage (F&B) sector has not convinced hoteliers.

The fact is that the new law, which generally offers a tax exemption for all F&B establishments, left bars located within hotels outside its provisions, an exception that is difficult to understand for the hotel industry.

The tax, a 5% levy on F&B, accommodation, and other related services such as room service, massages, and spa services, among others, has seen several exemptions in recent years, said to aim at the competitiveness of businesses.

The new rules were said to aim to end the disparity in treatment between similar establishments providing similar services that were not subject to the same fiscal rules and duties, but they seem to have fallen somewhat short of expectations.

On the topic, a hotel industry professional who spoke to the Times on condition of anonymity said that the promise of fair, more logical regulation, particularly with respect to the F&B sector, has clear shortcomings.

“For us, to be honest, it causes more confusion than anything else. We do not understand why the bars [in hotels] have been excluded from this exemption while the general rule applies to all the others. Besides, the revenues from the bars are just a very small fraction, almost irrelevant, I would say, of the revenues generated by the F&B sector,” he said, adding, “It was a good thing when we heard that the government was aiming to amend the law and end the 5% tourism tax on F&B. We always thought this was more of a bureaucratic hassle than a real source of income for the government. It was a surprise to learn that this exemption excluding hotel bars would still stand.”

Rutger Verschuren

Addressing the purpose of the levy itself, the same hotel sector representative noted, “Tourism taxes exist almost everywhere in the world, but in other jurisdictions they serve a clear purpose, and the rules are simple. The tax aims to impose an additional charge on visitors to a given city or place, paid by tourists when they use various services, and the revenue goes to the government rather than the service provider.”

According to the hotelier, in Macau, it’s unclear “what the purpose is as it applies to a selective group of services, some related, others completely unrelated, and it often ends up being more of a consumption tax that applies to everyone rather than a charge on visitors.”

Questioned by the Times about whether these regulations needed amendment, the interviewee said that it was indeed necessary to review the law, precisely to address the previously existing flaws, but, in his opinion, the changes were made in a “half-hearted” way.

“In Macau, the system between the Macao Government Tourism Office (MGTO) and the Municipal Affairs Bureau (IAM) was very complex, with different licensing systems and rules, but we understood it. Now there was an apparent attempt at the standardization of these rules and systems (which we agreed with and supported), but, in my opinion, it only went 80% of the way and left the other 20% hanging.”

Questioned about what is included in the 20% that was not amended, the same industry source noted that besides the situation of the hotel bars, he believes that it does not make much sense to remove the tax from all the restaurants and bars but keep it for  karaoke bars, dance rooms, or even spas.

“These venues are as much frequented by tourists as they are by locals, I believe. In fact, we have more local regular guests (spa members) than visitors to Macau who use our spa services, although this difference should be very small. Without having the accurate figures at hand, I would risk saying 49% are hotel guests (visitors) and 51% are spa members (locals), which should be about right.”

The hotelier further remarked that tourism tax should either be scrapped for most services or applied more consistently across the sector.

“If you ask me, we could easily scrap the tourism tax on all services other than accommodation and in-room services. But if the government believes that we really need this tax as a source of revenue for the region, then it should go in the opposite direction and expand its scope to include all services and products provided to visitors,” the industry veteran said.

“Honestly, I side with those who believe this is largely an unnecessary tax, and that Macau already has enough ways to generate revenue from visitors.”

MHA highlights ‘unfair’ competition

Sharing a similar perspective was Rutger Verschuren, vice chairman of the Macau Hotel Association (MHA) and area vice president of Artyzen Hospitality Group Macau & Hengqin.

Addressing the divergence now created by the law between the bars located outside and inside hotel properties, Verschuren said, “The gap, from the hoteliers’ perspective, is that bars operating within hotels were not included. A drink sold in a standalone bar is tax-free, while the same drink in a hotel bar across the street still carries the 5% charge – simply because it is billed under the hotel’s license rather than an independent F&B license. While hotel restaurants were brought into the exemption, hotel bars were not. So, while the law narrows one inequity, it leaves another between otherwise identical outlets.”

Verschuren also agreed that regarding revenue, “the amounts are modest. The tourism tax on hotel beverage sales is a very small line item relative to public revenue as a whole, which is why we view the exclusion as more a matter of legislative drafting and administrative convenience than of fiscal necessity,” he said, further explaining that “because a hotel is treated as a single taxable establishment, it is simpler to keep all services billed under that license – including the bar – inside the tax net. Harmonizing the treatment would cost the public purse very little.”

New changes that change nothing but competition

Addressing the practical effects of the new law on day-to-day operations, Verschuren also noted that procedures are largely unchanged, since hotels already file and remit the tax.

“The real impact is on business competitiveness; it places hotel bars and lounges at a slight pricing disadvantage compared with independent venues, particularly when attracting local and walk-in patrons, and adds a layer of compliance in separating exempt from non-exempt revenue. None of this is decisive on its own, but in a market focused on building F&B traffic, consistency of treatment matters. From a hotel guest’s perspective, this taxation works quite confusingly, and service staff will need to explain this time after time.”

“In short, we support the policy’s intent and would simply encourage the authorities to close the remaining gap so that all comparable F&B outlets, whether inside a hotel or on the street, are treated alike,” he concluded, noting that the measure does advance equity for most of the city’s F&B venues, which “now compete on a comparable tax footing,” a fact that the MHA vice chairman described as “a welcome direction.”

Contribution of tax to gov’t revenues

The impact of the tax exemption measures on the reduction in government receipts is not yet available in publicly disclosed figures.

The amount is also difficult to forecast or observe, as the yearly or monthly government revenue data presented by the Financial Services Bureau (DSF) do not disaggregate this tax.

Still, in 2021, before the tax amendments were made, when the government decided to extend the exemption to almost all establishments in a bid to keep economic activity functioning during the Covid-19 pandemic, the measure, which aimed to exempt some 370 establishments, including hotels, dance rooms, bars, karaoke bars, gyms, saunas, and massage parlors, from the tax, was said to cost the government some MOP379 million in revenue.

According to the government budget bill for 2026, the local government’s total budgeted fiscal revenue for this fiscal year is approximately MOP118.8 billion, and, according to government projections, some MOP92.53 billion will come from gaming tax revenue.

Such a figure is calculated on the basis of a gross gaming revenue (GGR) forecast of MOP236 billion, also predicted by the government, but market analysts claim it is unrealistic and extremely pessimistic, noting that the actual figure should be at least MOP10 billion higher.

In an attempt to verify the contribution of the tourism tax to the government’s total revenues, as well as the expected reduction in revenue, the Times contacted the DSF, but as of press time, had not received a response from the bureau.