Are politicians warming up the Airbnb grill?

After making a clumsy attempt to protect the hotel business from AIRBNB through categorization, politicians are trying a new blow.

Menda Stoyanova and Valeri Simeonov have proposed a patent tax to be imposed on apartments advertised on the online platform.

Once again, the bloodthirsty passion of politicians to protect their convenient business interests is showing. They are proposing all sorts of burdens for AIRBNB offers, just to hinder them. Perhaps, making them unprofitable for poorer Bulgarian consumers.

Patent tax, within the meaning of the law, is paid for "accommodations with no more than 20 rooms."

Looks like they made it up, huh?

They figured out how to stop – or at least hinder – AIRBNB activity.

Now… this could be considered a curtsy. They're not attacking AIRBNB activity, but they want to regulate it, right?

Everyone is supposed to pay their taxes, right?

Skipping the obvious immorality of the taxes, we need to consider the adequacy of the proposal in the current – lousy! – political context.

This adequacy can be sought in politicians' attempts to adapt to new services like AIRBNB, instead of lumping everything into one package.

However…

In practice, AIRBNB is a digital service. Yes, its practical full implementation requires physical accommodation, but the real source of added value is the online platform and the specific effects it brings. Because it is not at all the same as finding a tenant or managing a hotel.

But something else is more important...

Why exactly a patent tax? On what grounds?

In practice, you have an income, you buy a home, and along with these two facts, you pay a lot of taxes.

• Income tax
• Profit tax
• Real estate tax/property tax, etc.

Specifically, you pay income tax by declaring your income. Including income from AIRBNB transactions.

Why pay again?

As far as I understand, the benign answer from Menda and Valeri is that payment of patent tax is due, because AIRBNB must necessarily fall within the framework of the Tourism Act, "and for accommodation places with up to 20 rooms, registered under the Tourism Act, the amount of patent tax is applied, determined in the range from 25 to 250 BGN in the relevant regulation of the Local Taxes and Fees for Accommodation Places Act."

Here, so that it doesn't come across as nagging, I'll first say that it's commendable that they're considering options.

However, it turns out that they are picking on AIRBNB again.

Why do we need to enter the Tourism Act? AIRBNB is a digital service, not a standard hotel-type accommodation

In this case, the hosts' personal homes are used, for which tax is paid anyway. In practice, accommodation through the platform does not represent and does not require the use of state administration. Everything is administered at the expense of private entities.

1. The host uses his own home – for which the homeowner pays tax
2. The host's income, which also increases through AIRBNB transactions, is subject to tax upon declaration and especially after registering the AIRBNB place.
3. The structure that takes care of regulation and assumes risks and costs, along with regulation, is the AIRBNB platform. It is paid for this regulatory service and from its income, if so necessary, it is logical for states to collect tax – for example, profit tax… In any case, however, the state has no responsibility and no costs associated with administering AIRBNB relations. And isn’t that why we pay taxes, for a responsible and impartial third party? Well, there is one – the AIRBNB platform. This is business and, I repeat, if it is so important to collect tax, let it be on its profit.

I don't find any logic – purely technical, yet certainly no moral and economic logic, because we're talking about a tax, right... – to tax people for the very fact that some commercial activity is taking place on the territory of their own homes.

I repeat, for income tax, VAT, profit tax, real estate tax, some perverse explanation can be found. But a tax on the fact of activity? A tax on the fact that you carry out an activity of welcoming and communicating with guests? Shouldn't the result, the income, the profit, the added value be taxed? In principle, it shouldn't be, because we supposedly pay for state services, and not for our economic results, but we know that we actually pay,... because so...

But to pay for the very fact of some business relationship happening... It's a bit excessive, don't you think? To pay for the very fact of use in a specific way???

And why a patent tax anyway? A patent tax on welcoming and serving guests in one's own home? Is this practice subject to... patenting? AIRBNB offers have nothing to do with hotels, regardless of their size.

Our politicians seem very keen to equate AIRBNB with hotel services. Patent tax is paid by "small motels and hotels categorized with one to four stars."

Not that I understand the logic of tax laws - and not that there is any real logic in them at all - but the law definitely regulates HOTEL SERVICES by only specifying the size of the building and the scale of the hotel business, making a discount for smaller ones.

" The activities specified in Annex No. 4 of the law - accommodation facilities with no more than 20 rooms - are subject to an annual patent tax."

Once again, it is a clumsy attachment to an existing law, with the aim of reducing legislative and political efforts. Or perhaps also to protect political friends?

In this case, it seems that Valeri and Menda are grasping at the "With no more than 20 rooms" hook. Like cops who stop them and start inspecting the car, wondering what to grab onto.

So the two rely on the fact that, since Bulgarian homes have fewer than 20 rooms anyway, they can categorize them as small motels, places to stay, part of the hotel and tourism business, only even smaller - and again "with no more than 20 rooms."

However, as I pointed out in my previous article about the regulations against AIRBNB, there is no hotel service at all in this case.

Neither big nor small.

There is a guest accommodation service, yes, but it is quite specific. It is a kind of specific segment of the general category of Guest Accommodation.

This is often a key point in the decision to choose AIRBNB.

Therefore, at the very least, any state regulation should be proportionately small and specific. And in this case, such a regulation is even completely unnecessary, due to the truly great specificity and the already existing regulation from the AIRBNB platform itself.

There are several aspects here, also mentioned in my previous article about regulations and AIRBNB:

• The service is actually a digital connection between a host and a tourist. AIRBNB is a digital platform where you register. That's it. Then you use your own home.
• In reality, the business activity itself – if we have to hit the business with taxes so much – is done by AIRBNB. This activity can be defined as Digital Connection, for example. The activity of Guest Accommodation has nothing to do with hotel accommodation. Rather, you rent a room in your own home, use your own bed, blankets, lighting. You simply use your own supplies and space. And outside of them is the digital service. It is not at all like building/buying a separate and larger building, furnishing it specifically for guests/tourists and accepting tourist clients in your company.
• There is no point in the state regulating things because the platform regulates them. That is, the state has no costs for the implementation of the Digital Connection service and its regulation.
• Besides using their own homes, AIRBNB offers are distinguished precisely by the fact that they explicitly do not include accommodations categorized as motels and hotels. That's the idea. Users are a different type of traveler, one who is looking for different accommodations. They are looking for hosts rather than hoteliers, more guests than standard tourists, and more home-sharing than offering a place to sleep like a hotel/motel.
• Thus, in practice, the service that hosts provide can be called not Accommodation of tourists, but Hosting of guests, because it is provided in one's own home, and there is no need to buy a building, hire staff, or generally carry out a tourism and hotel business activity that is subject to regulation.
• And there is regulation anyway. From the AIRBNB platform. That is, not only is there no activity that requires state regulation – given that you are inviting someone to your home and at least both of you have accepted the risks of this, as with any invitation to a private home – but there is quite effective private regulation. If it is so necessary, let the State adapt its regulators to this new service – to check, to request data, to impose sanctions for violations of individual rights. Why does it have to fit so much into the existing /narrow/ framework???
• So in practice it turns out that politicians want to equate staying in a private home with staying in a motel or small hotel, referring only to the fact that these facilities are similar in size. Which is not even the case. It is one thing to have a motel, another to give a room in your home to someone, and in short.
• And staying in a private home – especially when AIRBNB's main mission of getting to know and bringing cultures and habits closer – has nothing in common as an experience with simply staying in a motel/hotel. No matter how small the latter is, no matter how many stars it has, it in no way offers the experience of staying in a private home: coziness, getting to know the local atmosphere, dinner with company and home-cooked food, sharing habits, knowledge, know-how, stories…
• Therefore, given that when you invite a guest to your home, he does not feel like he is staying at a hotel or motel, a patent tax does not make sense at all. Nor does any other state regulation concerning hotels and motels. What is actually taxed? Welcoming guests to your home? Vacuuming? Talking to guests in your own kitchen? As far as I understand, a patent tax is due when you have a place to stay. However, it seems to me that politicians are trying to use this too general formulation. As I interpret it, however, the place of stay is a small motel, for example. That is, you have saved money, you buy a small building, you do business with accommodation for guests, usually classic tourists. This tourist activity is carried out with a business asset, outside the home. Is it adequate to apply the same understanding when you simply allocate a room in your home, and that for a relatively short period of time?

Otherwise, it is clear that our politicians are very keen on taxing us. And it is clear that they still, unfortunately, have the support of many people. However, the regulations against AIRBNB definitely show attempts to merge the service with the hotel business in order to hit and suffocate it, in the service of convenient people.

Because if it were otherwise, at least it seems logical to me, regulations would be aimed directly at online processes. That is, protection against fake profiles, monitoring how effectively the AIRBNB platform protects users, collecting tax on AIRBNB's revenues and profits, creating effective mechanisms for accounting for income and protecting hosts/guests and the like. We simply need more individual freedom and respect for new technologies and human practices.

If this is not the approach, if they don't even rely on cooperation with AIRBNB so as not to hide income, if they directly attack homeowners and the activity itself, and, most of all, if, instead of adapting to the new digital service, they try in every possible way to blend in with a standard hotel service, things will go smoothly.

Rather, our politicians want to merge AIRBNB practices into the fold of their convenient hotel business.

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