19 April 2006

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Business Today

Uncertain tax future scares off student host families

Matthew Vella

Summer is slowly creeping in but the industry whose unique blend of sun, sea and English grammar makes up a significant niche for Maltese tourism – 10 per cent – is finding problems for its students: accommodation.
Hundreds of host families, over 1,000, every year open their doors to students learning English for a crucial 12 summer weeks when business is booming. But this year, a tax arrangement is scaring off the hosts.
“We are already facing a decrease right now,” Francesca Sciortino, from the International English Language Centre in Sliema, says. “The families are just not interested in accommodating students due to the new tax arrangements. We are facing problems now, and they will only increase in summer.”
This is set to be a challenge for language schools this summer. As host family income from the schools will now start being taxed, just as any normal income gets taxed, many are no longer thinking of offering their services anymore.
“Some families are even concerned about new burdens such as the water and electricity surcharge, so the tax is scaring many away,” Lisa Audino, marketing manager for Linguatime, says.
Host families are paid substantial fees from the language schools every week for every student they host. “We pay Lm30 per student per week, on half-board basis, and Lm40 on full-board basis,” Audino says. On average, a two-student host can earn Lm320 in a month and represents an important boost for low-income households during the summer when the English language industry is in full swing with some 100,000 students in Malta and Gozo. The bulk, 60 per cent, come in the seething July and August months.
Julian Cassar Torregiani, director at AM Language Studio, warns that the issue risks endangering an industry which still enjoys the competitive edge over other destinations.

His school lost bookings from 20 host families after the GRTU convened a meeting over the issue. The ambivalence over the tax scenario, he says, is costing the industry an important part of the equation.
“The minute host families start pulling out and the schools start losing accommodation, the agents will just move on to another destination. And host families are part of the equation: parents want their children to be in that protective environment.”
Cassar Torregiani says the effects of the as yet incomplete ‘agreement’ are only scaring more host families away: “There is nothing definite, so the speculation is scaring off the families. The government is really scraping the barrel for a very small amount of tax from households who really need the money: nobody opens up their homes to lose their privacy to foreign guests for the fun of it. What I want to see is government coming out with clear facts, because families want to know which expenses will be deductible or not. The money we give them is not profit – it is turnover. So any decision government takes should consider the ripple effect on the industry as a whole.”
The Malta Chamber of SMEs, the GRTU, which represents host families, claims its survey shows 46 per cent of host families have a gross intake of less than Lm1,000 per annum. Another 31 per cent earn between Lm1,000 and Lm1,500, and another 10 per cent take back just below Lm2,000.
Over a third of host families host students for more than 12 weeks. 66 per cent of host families host four students while 34 per cent host between 1 and 3 students.
The GRTU has claimed it wants taxation to be “fair and equitable” for the host families, which is why the provisional agreement with government will include a tax-free threshold for host families and an acceptable list of deductible expenses.
The agreement was reached prior to the local council elections in March, where localities contested included San Gwann and Sliema, areas where many host families are located.
The GRTU had told host families to go ahead and extend their bookings for the next summer, a word of advice which at the moment seems to have gone unheeded. GRTU president Paul Abela said the association is only waiting for government on the yet unsolved issue of tax arrears, and whether host families who had previously not declared their income, will have to pay backdated tax.
As for getting host families to open their doors once again to the summer’s influx, Abela says the association “will advise their members to move ahead with bookings.”


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