Chamber wants service charge to stay

Service charge has been levied in Malaysia for so long without any problems.

KOTA KINABALU: The Kota Kinabalu Chinese Chamber of Commerce and Industry (KKCCI), responding to fears expressed by Sabah hoteliers, wants the service charge component to stay. “Service charge can stay as long as business operators make it known through a notice at the premises and on their menus.”

KKCCI President Michael Lui pointed out that service charge had been levied in Malaysia for so long without any problems. “Patrons understand the concept and they know which outlets collect service charge.”

“Customers can decide whether they want to dine at an establishment which collects service charge or otherwise.”

Lui does not understand why service charge should suddenly become an issue in the country. “Service charge is a separate issue from the 6 per cent Goods and Services Tax (GST) levied since April 1.”

He blames the confusion on the Domestic Trade, Co-operatives and Consumerism Ministry (KPDNKK) being ambiguous on the service charge issue. “Initially, the Ministry said that no service charge should be collected.”

“Now, they are saying that only those establishments which have a collective agreement with their employees can collect service charge.”

Liu feels that it should be left to the establishments to decide whether they should collect service charge or otherwise. “The Ministry, by being ambiguous, has confused consumers.”

He advised the authorities concerned to work towards making the service charge component more transparent by systemizing it. “Put it in black and white but consult with industry players for a win-win situation. Consumers don’t mind paying service charge.”

Sabah hoteliers fear that without the service charge component in billing, the industry would be forced to cut back on staff and redefine service standards in a sector which operates seven days a week, 24 hours a day. Abolishing the service charge means dilution of the star rating system.

“If the service charge is abolished, what is the total loss of tourism receipt to the country? And the loss of direct income to workers in the hospitality industry?” asked Sabah Hotel Association (SHA) President Christopher Chan. “How do you justify the removal of the service charge?”

“The service charge is the motivator, a substitution, for the inconvenience faced by staff in the hotel industry which faces many challenges.”

The service charge, he added, was also a sort of financial subsidy for the industry which has to work even on public holidays. “The service charge will encourage staff to work long hours, put in overtime and turn up on public holidays.”

The SHA was appealing to the Ministry of Human Resources and the Ministry of Tourism and Culture, both State and Federal, to engage with stakeholders on the matter. It was also following up on a statement by the Malaysian Association of Hotels (MAH) which responded to calls by senior government officials that the service charge component in billing be abolished.

The service charge has been imposed by the hotel industry since 1975 through the Sales and Service Tax (SST) which has been abolished with the coming into force of the GST on April 1. Under SST, hotels charged 10 per cent service charge and 5 per cent government tax. 

The government component has since been increased to 6 per cent vide GST. That leaves a question mark over the 10 per cent service charge levied under the SST. Hotel workers covered by collective agreements are entitled, through service points, to the service charge collected. (Free Malaysia Today)