Mr. Mikayil Jabbarov,
Minister of Economy of the Republic of Azerbaijan
Dear Mr. Mikayil Jabbarov,
The Azerbaijan Hotel Association was established at the initiative of the hotel industry with the support of the State Tourism Agency of Azerbaijan and the Azerbaijan Tourism Board. The Association has been protecting the interests of hotels since its establishment and contributing to the development of the hospitality industry.
As you know, over the past decades, the tourism industry has become one of the leading sectors in the world economy, as well as in Azerbaijan. It has already been proven that the tourism industry has a high effect on the economy. This increases the importance of the tourism industry in the growth of the economy and the creation of employment opportunities. Nowadays, the development of this industry contributes not only to the economic and social results but also is one of the important tools in shaping the external image of the country.
Accommodation facilities are one of the main sectors of the tourism industry which provide the bulk of tax revenues to the state budget. Unfortunately, the COVID-19 virus that started in early 2020 and quickly began to spread all over the world led to restrictions on international, domestic traffic, and major disruptions in tourism activities. It is not a coincidence that the tourism sector, as well as the hotel industry, is characterized as the economic activity that was most affected by the pandemic, both in the world and in Azerbaijan.
As you know, to solve some relevant problems, the Government of Azerbaijan has so far implemented various measures, including support programs such as cost optimization and direct financial assistance to the salary fund.
By the decree of the President of the Republic of Azerbaijan dated June 4, Chapter 18 (Temporary tax regime applied as a result of the spread of the coronavirus pandemic”) was added to the tax code, subject to validity until 31.12.2020. Relevant changes have had a positive impact on optimizing the financial burden and reducing losses in the hospitality industry, as well as in other industries affected by the pandemic.
We would like to draw your attention to the fact that despite the above-mentioned state support, the total loss of Baku and regional hotels, in the first four quarters of 2020, accounted for more than 200 million manats.
Dear Mr. Mikayil Jabbarov,
Considering the situation where travel restrictions between countries continue to persist, hospitality business players’ losses are constantly increasing. To protect the continuing development and competitiveness of the hospitality business, prevent investment gaps and ensure the sustainability of operations, we kindly ask you to support the following proposals prepared by the Azerbaijan Hotel Association:
- An additional one year (From 31 December 2021) of validity of Chapter 18 of the Tax Code ("Temporary tax regime applied as a result of the spread of the coronavirus pandemic") applied to tourism industry businesses, including the hospitality industry.
- Establishment of the legal framework for differential VAT regime to be applied to the tourism industry including the hospitality sector.
- Establishment of the following special mechanism to support the financial accessibility, especially to increase working capital in the current conditions of acute liquidity shortage:
3.1 Establishment of a mechanism that will allow credit institutions to issue 18-month credit breaks on existing credit obligations for the hospitality industry. To avoid the liquidity problems that will arise for the credit institutions, centralized loans to be given to the credit institutions by the Central Bank.
3.2Increase the availability of credits for the industry by providing centralized tourism loans to credit institutions by the Central Bank.
We would like to note that the countries of the world have already begun to pursue policies in various directions in order to create a more competitive tourism sector against new challenges posed by the pandemic. The hospitality industry that we are representing has been contributing to the country's economy and social welfare, actively representing our country at international events. Moreover, it has implemented unconditional, rapid, and comprehensive pandemic control measures and gave support during the patriotic war. We kindly ask you to take into consideration the above-mentioned advantages of the hospitality industry, and we strongly believe and thank you in advance for your continued support to the industry.
Azerbaijan Hotel Association Executive Board,
Secretary General, Gunay Saglam