Earlier, a group consultation was held in the Regional Office of U-LEAD with Europe in the Zakarpattia Oblast on “Administration, Revenue Issues and Tourist Tax Use: Possible Municipal Solutions”. The event was attended by representatives of the Zakarpattia Oblast Military Administration, the Main Department of the State Fiscal Service in the Zakarpattia Oblast, local municipalities and tourism businesses.
What do municipalities say?
According to local self-government officials, most often hospitality businesses and owners of “green estates” pay the amount of the tourist tax which is inconsistent with the population or avoid paying this tax entirely. Local self-government bodies are not authorised to control their activities and only receive quarterly reports on their income, which is an obstacle in budget planning.
“Our municipality repairs roads and street lights, improves conditions for tourists, etc. We are looking for cooperation with other municipalities (seeking joint magnets, joint routes, etc.). This year, we worked out a development strategy, and the tourism sector is a priority direction there. After all, we understand that tourists do not come looking to spend the night but to receive experiences, attractive features and hospitality,” said Nelia Petrus, a representative of the Poliana municipality.
She added that the village council, business community and tax authorities should coordinate their efforts:
“The thing is that we do not see who is paying their taxes. Monitoring of the payment of the tourist tax should be systematic. Although we are aware that statements do not reflect the actual tourist flow, as a municipality, we cannot do anything about this.”
Her opinion regarding systematic daily monitoring of the tourist tax was seconded by the head of the Slavske municipality of the Lviv Oblast, Volodymyr Beha. He firmly believes that the tourism sector needs planning and information. According to him, no hospitality business remembers in March how many guests they had in January. Municipalities do not manage tourists who need water, sewage, lighting, garbage removal, road and sidewalk repair, etc. every day.
“Until there is a law on the daily administration of tourism, the tax won’t function properly,” said Mr Beha.
He cited the example of Austria, where tourists make their own check-ins: they enter information about where they came from and how long they spent there, and this is automatically entered into the general system.
In recent years, the Kolochava municipality has managed to increase income from the tourist tax. And although its head, Vasyl Khudynets, admitted that this money would not be enough for development projects, he shared his experience with his colleagues:
“We have done thorough work. These fees were collected from tourist estates as a tax agent’s contribution. Our municipal institution acted as a tax agent since the estates were not individual entrepreneurs and could not pay the tourist tax. We’ve organised a tax agent and thus collect the tourist tax.”
What do regional authorities say?
According to Marianna Hotra, the head of the Tourism and Resorts Department of the Zakarpattia Regional Military Administration, the tourist tax is the only statistics giving insight into the development of the industry. According to her, out of 64 municipalities in the oblast, 17 do not receive a tourist tax because they have not adopted a relevant resolution. The municipalities of Poliana, Baranyntsi, Koson and Uzhhorod are the four leaders getting the most out of this tax.
Marianna Hotra expressed her hope that the municipalities that were yet to set their tourism fee rates would finally tune in.
The Head of the Department of Economic and Regional Development of the Zakarpattia Regional Military Administration, Taras Tryndiak, shared his observations on the functioning of the tourist business. He spoke about the inspection of tourist facilities in the Drahobrat Ski Resort, which revealed a wide range of shortcomings, including non-target use of territories, changes in the purpose of land use, non-compliant buildings used as hotels, undocumented workers, etc.
He stressed that municipalities should carefully look into the businesses operating in their territory as responsible partners and help resolve the shortcomings:
“It is not fair or right to pretend that you do not know about these violations.”
What do the tax authorities say?
Nataliia Zhuk, Head of the Individual Taxation Department of the Main Department of the State Fiscal Service in the Zakarpattia Oblast, spoke about the specific aspects of the tourist tax administration, outlining the range of payers and persons who are exempt from paying the tax.
She noted that the rates of the tourist tax in the oblast are differentiated and range from 0.1% to 0.5% of the minimum wage for domestic tourism and from 0.1% to 5% of the minimum wage for foreign tourists. However, some municipalities have set rather low rates, which prevents them from making the most of the existing tourist potential and receiving more money for local budgets.
Tax officials answered the questions and welcomed active cooperation from the participants of the event, including with the use of the Communication Tax Platform. This will allow for balancing the interests of municipalities in filling budgets and incentivising the development of the tourism industry in the oblast.
Instead of conclusions: a comment from the organisers
- According to Pavlo Lohvinov, Head of the Regional Office of U-LEAD with Europe in Zakarpattia Oblast, this event is the first in a series of meetings aimed at strengthening the capacity of municipalities through the effective use of local taxes.
- He also added that the tourist tax is one of five local taxes that are 100% credited to local budgets. Municipalities must be proactive and build effective interaction with the business community. This will boost the hospitality sector of the municipality and increase the number of visitors, which will have a positive impact on the service sector and facilitate an increase in budget revenues.
- According to him, the discussion enabled working out possible mechanisms of interaction between the local self-government, the State Tax Service and businesses regarding the improvement of fiscal discipline, payment of the tourist tax and its intended use. The event helped to get clarifications on problematic issues from the authorised bodies as well as gain experience and hear about success stories in the field of hospitality of the Carpathian municipalities.
For reference.
The tourist tax is a local tax that goes towards the municipal budget. Its rates and the necessity of its implementation are decided by the local council. In the 1st quarter of 2024, there were 410 tourist taxpayers in the Zakarpattia Oblast, including 60 legal entities and 350 individual entrepreneurs. During this period, tourist tax revenues amounted to UAH 4.07 million, which is 4.9% less compared to the same period in 2023. In 2023, 535 payers paid the tourist tax, and the total amount of revenues was UAH 22.2 million.