New decision to enable reducing prices in tourism complexes, expert says [COMMENTARY]

Tourism is considered a promising but not fully activated economic sector in Azerbaijan. Many believe that this field of business will be one of the main driving forces in Azerbaijan's economy, especially in the post-oil period. The government's policies in this direction and the achievements in the sector strengthen the belief. Thus, Azerbaijan is in 39th place among 148 countries in tourism competitiveness indicators. The World Travel and Tourism Council reported that the country ranks among the top ten countries with the greatest increase in visitor exports from 2010 to 2016. Besides, as a chart shows, tourism has increased rapidly in the country.

Besides that, the government did several projects to develop the sector. To promote tourism, Azerbaijan sponsored Atletico Madird jerseys describing "Azerbaijan: Land of Fire." In 2018, a new tourism brand and the slogan "Take Another Look" were introduced. Baku introduces e-visa, which facilitates obtaining a visa. Azerbaijan began tourism-development planning for 2002–2005 and 2010–2014

In addition, Azerbaijani Milli Majlis (Parliament) adopted new legislation that freed tourism complexes located in the regions (except the Absheron Peninsula) from property taxes.

The officials say that it is known that the income of regional tourism is mainly formed by seasonal activity, and the level of income in this sector decreases sharply at other times. The value of accommodation assets in the tourism sector is quite large. For this reason, property tax, being a fixed cost, creates a significant tax burden on businesses operating seasonally.

Therefore, in order to develop regional tourism and reduce fixed tax costs, it is planned to provide tax incentives to tourism entities (hotels and sanatoriums). For this purpose, with the exception of the cities of Baku, Sumgayit, Khirdalan, and the Absheron region, the property tax for real estate used in hotels and sanatoriums in other cities and regions of the republic (except for the period when entrepreneurial activity is temporarily suspended in accordance with Article 16.3 of the Tax Code) is 2024. A change was made in the Tax Code regarding a 75 percent reduction for a period of 3 years from January 1.

Speaking to Azernews on the issue, expert in tourism Rahman Quliyev said that first up, the new decision, which will come into force on January 1, can be considered a step taken for the improvement of the social economy of the regions. Moreover, this decision will have a positive effect on the working conditions and regime of tourist complexes and hotels operating in the regions.

“Thus, the introduction of a 75 percent exemption from property tax will also enable hotel owners to review their pricing policies. I expect that this decision will reduce prices by about 5-15 percent. This percentage may seem small at first glance, but it is a big sum for individuals and families who buy a package for a 1-week holiday in the regions. Undoubtedly, it would be better if this decision was applied to the whole country and was more comprehensive. As is known, there are hotels operating by the sea in the Absheron Peninsular that are visited by both local and foreign tourists during the season. Their price would be reasonable too,” the expert said.

The expert notes that prices occupy an important place in the tourism sector as well as in other sectors. He stated that reasonable prices will make foreign tourists come to Azerbaijan more regularly, which will positively affect the image of the country in terms of tourism.

“It should also be noted that reasonable prices are important not only for foreign tourists but also for local tourists. Reasonable prices will undoubtedly direct local tourists to choose tourist centres in the country,” the expert Rehman Quliyev added.