Despite the increasing number of tourist arrivals in the CNMI, the total amount of hotel occupancy tax that goes to the Marianas Visitors Authority remains the same.
That leads the MVA to suspect that many tourists use the lodging services of bed-and-breakfast establishments, which are private homes that also function as substandard hotels.
In their meeting last week, MVA managing director Chris Concepcion reported to the MVA board that despite the rising number of tourists here, the hotel occupancy tax remains constant.
“This means these tourists are staying somewhere and not paying the proper taxes,” Concepcion told the board.
A bed and breakfast establishment, or BNB, provides lodging services for tourists without paying the requisite hotel occupancy tax. It is usually a house with multiple rooms and do not pay taxes.
Because of this, MVA is forced to adjust future budgets. The hotel occupancy tax is a big chunk of the MVA budget, with 15 percent of the entirety of the hotel occupancy tax going to the MVA budget.
MVA board member Jerry Tan shared with board members a quick search for rooms on multiple BNB websites.
“There are 72 guesthouses in different sizes. The one that we can assess online in regards to price has 410 rooms. There are 20 that cannot be assessed online. That could be another 100 or 200 more rooms of varying sizes. We are talking about a significant number of rooms that our guests [could use without paying for the hotel occupancy tax],” said Tan.
MVA board member Gloria Cavanagh agreed with Tan, saying the numbers are significantly high.
“These are the ones that you can actually look for. This is about 150,000 room nights per year,” said Cavanagh.
Cavanagh said the MVA’s budget projections have to be looked at again because of the effects BNBs have on the island.
“You can go on all these websites and book 410 rooms. That is about 150,000 room nights that may not be paying taxes,” she said.
“For October and November , [MVA] saw a decrease of about $263,000 from our projected revenue. That money would have more than made up that amount if we do collect the taxes,” said Cavanagh.
She also raised a question about the safety of BNBs.
“[The hotel occupancy tax] is one thing, another thing is every hotel has to pay an annual fee for their fire permits; that is in the thousands. The fire permit ensures that our guests are safe. Are we going to wait before one of these places have a fire and [affect the reputation of Saipan]?”
“We need that enforcement; we need that enforcement now more than ever. There are new places popping up and are not paying the hotel occupancy tax,” added Cavanagh.
Concepcion said the Department of Finance has already been notified about these BNBs.
“There are also a few websites in foreign languages that we have found and shared with the DOF to beef up their enforcement efforts. [MVA is] assured by the DOF that they are investigating,” said Concepcion.
The tricky part is pinpointing each and every establishment and enforcing the taxes so they can continue doing business.
According to MVA legal counsel Michael Witry, the Department of Commerce has been working on this. Witry pointed out that CNMI law allows BNB establishments to be taxed.
The MVA later plans to meet with Finance Secretary Larissa Larsson to talk about this matter.
According to Cavanagh, a task force has been formed to tackle the BNB matter on Saipan. Cavanagh, who is also a member of the task force, said the task force has yet to meet since being organized.