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A Larger Slice of a Shrinking Pie

6 Bali Regencies Demanding a Larger Piece of Badung’s Shrinking Hotel and Restaurant Tax Coffers.

(1/16/2006) With most large hotels operating in Bali southernmost regency of Badung, the 10% tax collected on hotel and restaurant bills have traditionally been shared with 6 other regencies in Bali. The justification for this "sharing of the tax wealth" is based on the fact that while many people spend their days touring Bali's attractive regencies far removed from the Island’s main hotel areas, the tourists spend most of their money with companies located in the South.

As reported in balidiscovery.com [ Bali's Hotel & Restaurant Tax Revenues to Dive] lowered expectations on tourist arrivals for 2006 have forced the Badung Government to lower it Hotel and Restaurant Tax (PHR) targets for the coming year, predicting a 23.55% fall in tax collection revenues.

In the face of less money to share, numerous project demanding funding and demands for more fund to be spent on tourism promotion the Regent of Badung recently proposed that 12% of the total PHR tax take in Badung regency be distributed to 5 other Bali regencies, namely – Karangasem, Buleleng, Bangli, Negara, Klungkung and Tabanan. That proposal, made at a recent meeting attended by representatives from each of the regencies, ended in a deadlock with the regencies demanding a 22% share and rejecting a compromise 15% share eventually offered by Badung.

Badung officials appear adamant in reducing the 6 regencies share of the PHR tax pie, citing both the expected downturn in tax revenues and past failure of the regencies to use the money on tourism related projects. Apparently Badung officials are negotiating not only for lower shares to other regencies but assurances that funds allocated will be used for tourism activities.

According to a report in Bisnis Bali, the 6 regencies outside of Badung are seeking an estimated Rp. 59.57 billion (approximately US$6 million) allocation from the PHR collections.

Because of the current deadlock in discussions between the regencies and the Badung government, negotiation are expected to be scheduled to continue in the coming weeks.