(ECNS) -- A tax official has said the recent price spike at several hotels is not connected to the government's plan to replace a business tax with a value-added tax, China Business News reports.
China will levy VAT on the construction, real estate, financial and consumer services sectors from May 1, following trial programs in other sectors since 2012.
Hyatt and InterContinental are among the hotels that have increased the service fee from 15 percent to 21.9 percent while keeping room rates unchanged, with some Marriott hotels implementing a similar move. Staff members at the hotels told the newspaper that the increase is to cover costs from the pending VAT charges.
The price for a standard room at the Holiday Inn Express Shanghai Jiading Industry Park, managed by the InterContinental Hotels Group, is 287.9 yuan a night, but the service fee will increase from 10 percent of the room rate to 15 percent after May 1, said a widely traveled tourist.
But an official from the State Administration of Taxation in Shanghai said the tax reform means a nominal increase of 0.66 percent for an enterprise with general taxpayer status, and a decrease of 2.1 percent for the small taxpayer.
The actual tax burden will remain basically the same or drop slightly, so tax reform should not be blamed for the price increase by some hotels, according to the official.
Li Jun, a taxation partner with PricewaterhouseCoopers China, said hotels have passed the VAT cost to consumers and kept the business tax as profits.
It's not against law for hotels to increase service fees, but the move has drawn attention from price regulation and antitrust authorities, the report added.
Zhao Huanyan, an expert in hotel management, said the disguised price rise may drive some consumers away from China's already oversupplied hotel market.
