Kutchan Town in Goshi Prefecture, the only town in Hokkaido that levies a non-statutory purpose tax called “accommodation tax,” has announced that its tax revenue for fiscal 2023 is expected to reach a record high of over 400 million yen. This is almost double the previous year’s 243 million yen. In addition to the return of customers to the Niseko area after the end of the coronavirus pandemic, the “fixed rate system” that imposes a flat 2% tax on hotels and condominiums has also contributed to an increase in tax revenue.
Understanding the Pros and Cons of Flat-rate and Fixed-rate Systems for Accommodation Tax in Hokkaido
“In the same Niseko area, Kutchan Town adopts the ‘flat-rate system,’ while Niseko Town opts for the ‘fixed-rate system.’ As a result, there is a significant difference in tax revenue. Will this disparity in tax revenue manifest as a difference in their status as tourist destinations?”
In Hokkaido, the accommodation tax system has been implemented with the aim of fostering the development of the tourism industry and revitalizing the regional economy. This system operates under two main frameworks: the flat-rate system and the fixed-rate system. Each of these systems carries its own set of advantages and disadvantages.
Stability in Revenue: Under the flat-rate system, a fixed percentage of the accommodation fee is taxed. This ensures stability in tax revenue as it remains unaffected by fluctuations in tourist seasons or changes in demand.
Equitable Distribution of Tax Burden: High-end accommodations and affluent visitors contribute proportionally higher taxes, leading to a redistribution of revenue and enhancing social equity.
Impact on Budget Accommodations: Budget accommodations might face a disproportionately higher tax burden under the flat-rate system, potentially affecting consumer choices and reducing demand.
Potential Decrease in Demand: The imposition of higher tax rates might deter some consumers from booking accommodations, leading to a decrease in overall demand and adverse effects on the regional economy.
Predictable Tax Revenue: The fixed-rate system imposes a predetermined amount on accommodation fees, facilitating easier revenue forecasting and enabling effective budget planning and investment decisions by local authorities.
Enhanced Competitiveness of Budget Accommodations: Since the tax burden remains uniform under the fixed-rate system, budget accommodations become more competitive, expanding consumer choices.
Favoritism towards High-end Accommodations: High-end accommodations benefit from a relatively lower tax burden under the fixed-rate system, potentially skewing market dynamics and exacerbating inequalities.
Lack of Equity in Tax Burden: Regardless of individual consumer economic status or usage conditions, the same tax amount is levied, raising concerns about equity, especially in socioeconomically diverse communities.
The accommodation tax system in Hokkaido is designed to foster regional economic growth and ensure the sustainability of the tourism industry. It is crucial to carefully consider the merits and drawbacks of both flat-rate and fixed-rate systems, tailoring the chosen approach to meet the specific needs and economic conditions of the region.
2023/10/27 update
2023/6/18 update
2024/3/13 update
2024/1/15 update
401-5, Soga
Niseko-cho, Abuta-gun, Hokkaido 048-1522, Japan
Tel: +81 (0) 50-3553-4976
Email: info@ngvp.jp
© 2023 Niseko Great View Property All rights reserved.
