KARACHI, May 26: Room occupancy in hotels has dropped to 40 per cent in Karachi due to the law and order situation and political uncertainty, while the Sindh government is charging tax on a fixed rate, presuming 80 per cent occupancy.

This was stated by Pakistan Hotels Association President Mustansir Zaki at a meeting with Excise and Taxation Minister Mukesh Kumar Chawla on Friday.

He suggested that the hotel tax now charged at the rate of 7.5 per cent of the capacity should be charged at actual occupancy or be reduced to 40 to 50 per cent in the new budget.

The minister assured the association that their proposals would be considered. He urged the association to submit comprehensive proposals in this regard.

Sources at the excise and taxation ministry told Dawn that the hotel tax was raised to 80 per cent of the accommodation capacity of hotels from 60 per cent (for small hotels) and 70 per cent for big hotels in the 2006-07 budget.

The department collected Rs151 million from hotel tax during the first 10 months of the current fiscal year against a target of Rs200 million.

Talking to Dawn, Mr Mustansir said the ratio of foreign guests in hotels of the city had reduced from 20 to 25 per cent to less than 0.1 per cent. He said that the association had sought a meeting with the Sindh chief minister to apprise him of the worsening business situation in the hotel industry.

He said that in the last budget the association proposed to cut the tax rate, but it was raised to 80 per cent of the capacity.