As the Bangkok Metropolitan Administration (BMA) plans to introduce a 3% hotel tax to increase revenue, the Thai Hotels Association (THA) has urged the authority to begin with a lower rate of 0.5-1% and provide additional support to help tourism operators affected by the Middle East conflict.

Bangkok governor Chadchart Sittipunt earlier proposed amendments to the BMA Act to allow the city to levy new local taxes, including a 3% tax on hotel and accommodation room charges.

The authority said the BMA currently lacks the legal authority to impose a hotel tax, which could generate 1 billion baht in annual revenue, while provincial administrative organisations already have such authority.

THA president Thienprasit Chaiyapatranun said hotel operators in Bangkok are not opposed to a new levy, but the proposed rate would place too much of a burden on businesses during the tourism slowdown.

The 1997 Provincial Administrative Organization Act allows provincial administrative organisations to collect a hotel maintenance fee of up to 3% of room rental charges from guests.

Mr Thienprasit said that tax rates vary across the provinces, with most authorities not collecting the maximum rate of 3%.

For instance, Phuket currently levies a 1% rate, although there has also been a proposal to increase it to 3%.

He said that if the tax is imposed, hotels might have to raise room rates to absorb the additional cost, which could affect tourism to some extent.

As the industry is still grappling with volatile energy prices and high travel costs, the BMA should begin with a rate of 0.5-1%, rather than imposing the full 3% rate immediately, said Mr Thienprasit.

The authority should consider how to reinvest tax revenue in the hospitality and tourism industry, such as by supporting hotel sustainability standards or funding marketing campaigns to attract more tourists, he said.

The proposal also highlights unfair competition between licensed hotels and illegal accommodations, as the latter can avoid such taxes, noted Mr Thienprasit.

The majority of rooms in Bangkok sold via online travel agents are in illegal accommodation, he said.

"Whenever the authorities seek to raise revenue, they first turn to businesses that comply with the law, whether through new taxes or higher labour costs," said Mr Thienprasit. "If the BMA raises this tax, the THA wants to know how it plans to tackle illegal operators, particularly those using modified buildings that could compromise guest safety."

As of Aug 1, Thailand had welcomed 18.5 million foreign tourists this year, down 3% year-on-year, generating 896 billion baht in revenue.

The BMA also proposed raising the land and building tax rate for agricultural land to encourage more productive land use and close loopholes that allow landowners to avoid tax by planting only minimal crops.

Mr Thienprasit said the adjustment could prompt some landowners to sell their plots rather than invest in new developments, particularly if their locations are not commercially attractive.

Some may conclude that investing in new projects is not financially viable, given that land tax is calculated based on asset value and location rather than actual business revenue.