Kathmandu, February 7

The retarded income growth of star hotels despite the rise in flow of tourists to the country has raised a few eyebrows at Nepal Rastra Bank (NRB) and the tax administration.

The central bank and the tax administration have been investigating the book-keeping records of some star hotels in the country suspecting their involvement in foreign exchange and tax embezzlement, a high level source at NRB told The Himalayan Times.

Capitalising on the situation after the earthquake and border blockade, the two major shocks to rattle the tourism industry of the country, some star hotels are suspected of transferring their income to foreign countries in a bid to make investments abroad.

“Normally on package sales made by travel and tour operators of foreign countries, they receive payment from the travellers and we suspect the payment made for hotel-booking is diverted to other countries instead of bringing it to Nepal,” the source explained. “They might be maintaining different book-keeping records for different purposes.”

However, Amarman Shakya, president of the Hotel Association Nepal, defended the hoteliers and said that tourist standard hotels have been maintaining their book-keeping records in a transparent manner. “Income of the hotels and tax submission can easily be tracked based on the flow of tourists (occupancy of hotels) in the country,” said Shakya.

Government officials suspect that the hoteliers, through their family members and relatives, are tapping the payments made by tourists (in source countries) to the travel and tour operators while purchasing tour packages.

“While such activities are affecting the foreign exchange earnings of the country on the one hand, the government’s revenue collection is also taking a hit,” one official at the Department of Revenue Investigation said, requesting anonymity owing to the sensitivity of the issue. “An investigation has been launched based on credible information and we are collecting evidences. The government will take action against erring hotels after investigation concludes.”

Expressing confidence that nothing substantial will surface during the investigation, Shakya warned though that such steps will do nothing other than to demoralise the hotel sector.

The contribution of the tourism sector (in which hotels are a major component) in the economy has been more or less stagnant since long. The government expects the contribution to go up slightly as the number of high standard hotels and arrival of high-end tourists in the country has been increasing in recent times. As the hotel sector is considered to be the major source of foreign exchange earnings, if hoteliers are, in fact, tapping funds from the tourist source countries, the country’s foreign exchange earnings could take a major hit.

For his part, Shakya said that foreign currency earnings is a unique feature of the tourism business and it is always a pride for the hoteliers to support the country to make the foreign exchange reserve robust by earning more foreign currency from tourists.