Message from the Eleanor McMahon, Minister of Tourism, Culture and Sport – Tax on transient accommodations.
Ontario’s tourism industry is a significant economic driver that helps create good, sustainable jobs across the province. It is important that the municipality and the local tourism industry
continue to work together to ensure that it is implemented in a way that benefits both parties.
As you know, in response to the requests from the municipal sector, the 2017 Budget granted municipalities the authority to implement a tax on transient accommodations, should they choose to do so. I am writing to let you know that the relevant legislative changes will come into effect on December 1, 2017.
The new regulations will provide municipalities with the flexibility to determine the design, administration and collection of the tax. The regulations also recognize the importance of tourism in Ontario communities by maintaining funding to existing tourism organizations that have benefitted from Destination Marketing Fees (DMF) in the past.
While we support the efforts of municipalities to raise additional revenue, we have been clear that municipalities who chose to introduce a tax on transient accommodation must do so in a way that ensures we can maintain a stable, vibrant tourism environment. These legislative changes will give single-tier and lower-tier municipalities the ability to implement a tax on transient accommodations by enacting the appropriate by-laws.
This will include a number of requirements:
Municipalities will be required to share the revenues with not-for-profit tourism organizations, such as Regional Tourism Organizations or local Destination Marketing Organizations.
Where a DMF program existed in a municipality municipality will generally be required to share the greater of:
prior to the imposition of the tax, the the total amount of DMP revenues received by the tourism organization under a DMP from accommodations in the municipality, in the fiscal year before the tax came into effect, or
the amount paid by the municipality to the tourism organization in the previous year, adjusted by a 10-year rolling average of the annual percentage change in Ontario’s total tourism receipts, subject to a 2-year lag. …/2 -2-
Where no formal DMF exists, at least 50 per cent municipality’s reasonable costs of collecting and administering the tax must be shared with an eligible tourism organization.
The rules set out case do the regulations require municipalities to share more tax revenue than they collect.
Based on consultations with the tourism industry, a number of changes were made to the regulations. These include expanding the definition of tourism promotion to include tourism development, and ensuring that amounts transferred from hotel associations to tourism organizations out of reserves of DMF revenues built up prior to the introduction of a tax, will not be deducted from the amounts to be shared by municipalities in years that a tax is in effect.
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