Reevely: Ottawa wants to hike hotel-room tax, apply it to Airbnb rentals

OttawaCitizen.com
Nov. 29, 2017
David Reevely

Tourists visiting Ottawa can expect to pay higher taxes on their hotel rooms in the new year and won’t be able to dodge them by renting places with services like Airbnb.

The provincial government gave Ontario cities more power to impose these taxes this year and city hall’s finance staff are urging city council to take this one up.

If council agrees, a voluntary three-per-cent charge already levied by most hotels in the city is to be replaced with a mandatory four-per-cent tax on all short-term accommodations, collected by the owners and handed over to the Ottawa Tourism and Convention Authority to spend on attracting more visitors.

This is the easiest sort of tax for politicians to charge: the kind their own voters don’t pay. That’s an explicit selling point for Ottawa Tourism, whose chief executive Michael Crockatt described it as a “performance-based” tax on visitors.

“This means (a) locals aren’t paying it, and (b) the more successful Ottawa Tourism is at attracting more visitors and more spending, the more revenue will be available for future sales, marketing, and development initiatives,” Crockatt said.

The voluntary levy the hotel association has collected since 2004 has raised $8 million to $9 million a year lately, money the Ottawa Gatineau Hotel Association hands over to the tourism agency for sales and marketing campaigns.

The two groups share an office in the newish tower at 150 Elgin St., which the city supplied them instead of building a concert hall at the base of the building.

The city plans to raise the tax by a point (which would raise the annual take to between $10 million to $11 million or so by itself) and apply it to many more rooms. Crockatt said nobody knows how much the change might bring in.

“We don’t know the exact number of non-participating accommodators in Ottawa, and the total amount generated depends on changes in accommodation supply, number of visitors, how much they are paying,” he said.

But however much it is, the tourism agency can use the extra money to advertise in more places, support more Ottawa events, and invest in making Ottawa a more attractive destination, Crockatt said.

The tax will apply to any accommodation with a roof, where people rent for stays of fewer than 30 days. So that’s everything from hotels to bed-and-breakfasts, including “participants operating a common platform for individual accommodators” — which means websites like Airbnb, where people can put up rooms and apartments and even houses for people looking for cheaper or quirkier accommodation than they’d get in a chain hotel.

The city’s already in negotiations with Airbnb over collecting the tax, which the company says should be no problem.

“Airbnb has agreements in more than 300 jurisdictions globally to collect and remit hotel taxes on behalf of our hosts and guests, and we want to continue to pay our fair share,” said Alex Dagg, the company’s Toronto-based manager for public-policy issues in Canada. “We are committed to working with cities like Ottawa to develop smart, easy-to-follow regulations that support home sharing — including regulations around taxation.”

Dagg led a lobbying blitz at city hall in August, including in Mayor Jim Watson’s office, to talk about how the company’s business is regulated here.

So far, the city’s relationship with Airbnb is night-and-day different from the way it used to get along with Uber, whose “sharing economy” business is pretty similar in concept to Airbnb’s — using an online platform to connect private citizens willing to use their own cars to drive paying customers around, undercutting taxi drivers who have to follow more stringent regulations. City council eventually legalized Uber’s business over the taxi industry’s objections, having realized that there was no practical way of stopping it.

But unlike taxi drivers and dispatching companies, we don’t license landlords in Ottawa, or deliberately limit the supply of shelter the way we have limited the supply of taxis. There’s less reason to fight Airbnb.

We also don’t have quite the same desperate housing crunch they do in Toronto, where city council is worried that apartments that might otherwise have been leased by the year are instead being rented out by the day, making the shortage of units worse.

You can generally operate a small business out of your home as long as it’s not industrial, a store or a parking lot, and rentals on a commercial scale can edge into that territory.

That said, our city council’s expecting a report within weeks on whether Airbnb and its competitors are causing significant neighbourhood problems and whether the bylaw or planning departments need more power to solve them.