Ontario municipalities may begin to charge visitors a hotel tax

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Ontario’s Budget 2017 includes a measure that proposes allowing certain municipalities the authority to levy their own taxes.

According to the City of Toronto Act, 2006 (COTA), the City is given broad, permissive authority to levy its own taxes, but that does not include taxes on transient accommodation. It has been proposed the authority in COTA would be amended to remove this exclusion. This authority would also be extended to single-tier and lower-tier municipalities through proposed amendments to the Municipal Act, 2001.

The new tax would be added to the province’s 13 per cent Harmonized Sales Tax (HST) that is already applied to every hotel room in the province. All municipalities that adopt this hotel tax and have an existing Destination Marketing Fee (DMF) program in place would be required to share their hotel tax revenue with their not-for-profit tourism organization in an amount that matches the total revenue of the existing DMF program. In municipalities where a DMF does not exist, at least 50 per cent of their hotel tax revenue would be shared with their respective regional tourism organization or not-for-profit tourism organization.

The Greater Toronto Hotel Association (GTHA) released a statement saying, “the imposition of this tax with no defined amount and no cap has the potential to bring the total sales tax on a hotel room to an unprecedented high.”

“The introduction of a new hotel tax in Ontario has the potential to seriously reduce the competitiveness of Ontario’s tourism sector,” said Terry Mundell, GTHA president and CEO, in a press release. “It is unclear why the tourism sector has been singled out for a tax increase, while other sectors are being supported and bolstered with provincial incentives to ensure their sustainability. We are disappointed the Wynne government has added a new sales tax that consequentially provides a competitive advantage to other jurisdictions across Canada and the United States. Our ability to bring world class events to Ontario is severely constrained and will directly impact Ontario’s economy.”

He went on to say that there was not enough information presented to understand the tax measures applicable to the home sharing economy. “This sector, while the fastest growing accommodation sector in the GTA, does not pay equivalent taxes, nor HST, which means foregone revenue dedicated to vital services such as health care, education and infrastructure. It is incumbent upon the province to province assurance that the home sharing economy will pay its fair share.”

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