Hosting a growing industry

Host families are a very important aspect of English language learning tourism. John Dimech, president of the Federation of English Language Teaching Organisations - Malta (Feltom), tells Claudia Calleja that more families need to be encouraged to host students and that the government ought to help this happen.

Thousands of students come here each year to learn English and the majority opt to stay with host families. But despite the fact that the number of students has constantly grown in the past decade, there are not enough families to satisfy these students' demands, Mr Dimech said.

"In recent years, there has been a natural shift from host families to residential accommodation, which is becoming more and more popular. The ideal residential accommodation is in self-catering apartments, preferably studio type. However, hotel accommodation is being offered as an alternative, which is not always ideal and there have been some conflicts between students and tourists sharing the same hotels. We need to encourage more families to host students rather than allow for the shift from host families to hotels to accelerate for the wrong reasons," Mr Dimech added.

These "wrong reasons", he explained, stemmed from the fact that potential host families had come to think that hosting students was not feasible. As a result of this misconception the number of host families dropped just when the demand was on the rise.

This drop was triggered two years ago when the Finance Ministry declared that host families, who had not declared their income from hosting students, would be asked to pay income tax on revenue from hosting students up to nine years in arrears.

This statement caused havoc among host families and schools found it difficult to recruit families. Then, following several meetings with Feltom and the Chamber of Small and Medium-Sized Enterprises - GRTU, the government introduced a new taxation method.

The taxable income was 35 per cent of revenue above the tax-free limit of Lm1,000. This meant that, after Lm1,000 was subtracted from the total earnings, the remaining 65 per cent was also tax free to cover expenses. The taxable 35 per cent was to be taxed according to the tax bracket a family fell into.

Mr Dimech said Feltom believed the new method of taxation on income from hosting students was fair and practical. It was also wise of the government to forget the arrears. However, since the tax system was introduced just at the beginning of the busy season, it had very negative results. Host families were scared off and figures showed that the number of hosting applications dropped from 2,013 in 2005 to 1,306 last year.

"Although the government argued that the new method is fair, it created unnecessary alarm and there was a sudden drop in the number of host families," he said, stressing that host families may not realise that, with the new system, they may not be liable to pay any tax at all, or only pay a fair and marginal amount of tax that makes hosting still worth it.

Moreover, he added that following a meeting with Tourism Minister Francis Zammit Dimech and Malta Tourism Authority (MTA) chairman Sam Mifsud on this issue, the minister agreed to waive, as from this year, the Lm20 annual contribution that families paid to the MTA.

"This sector has the potential to grow and we need to do everything we can to encourage more families to join our sector," he said, adding that last year about 66,000 students came to Malta.

The Tourism Segments Report published in 2005 showed that more than half of the students (55 per cent) stayed with host families. And two years down the line the demand for host families appears to have decreased.

But is this reality, or has the supply of host families dropped?

It is believed there is a shift in the direction of alternative accommodation, namely residential accommodation, Mr Dimech said. However, this may be unnaturally inflated in view of the shortage of host families.

So how important are host families to the industry?

"Having host families is important for various reasons. First of all, they offer students the right environment, not only in terms of hospitality but also for the opportunity to speak English. They are considered to be an integral part of our sector so it's a pity that the numbers have dwindled," he said.

Mr Dimech recalled that Feltom had recommended to the Ministry of Finance to exempt host families from paying tax on income from hosting students, as was the case in the UK, Ireland, the US and Australia.

But, wouldn't that infuriate the rest of Malta's taxpayers? Why should host families be exempt from paying tax and others not?

Mr Dimech argued that this was something totally different because host families were not running a business and were not a commercial entity.

"I think we still have a strong case. I had warned the Parliamentary Secretary at the Ministry of Finance at the time that there was a risk of rocking our sector. Last year, the drop of about 700 host families was equivalent to a decrease of Lm42,000 to the government in licences (Lm40 each family) and contributions to MTA (Lm20 each family).

"On the other hand, the exemption would be more favourable to the families, the sector and the national economy. Admittedly, a shift from one type of accommodation to another may not appear to be 'rocking' anything. However, unless the alternative residential accommodation is readily available, this 'forced' shift could be harmful. At the end of the day, if this sector grows - and we believe it has the potential to grow to up to 100,000 students a year in the next five years - there will be more schools generating more activity and profits and the government will receive more tax. So, in the long run, the government would benefit.

"Let us not overlook the fact that this is possibly the only sector within the tourist industry that has constantly grown by at least five to six per cent almost every year. This is mainly due to the fact that the stakeholders have been willing to invest in this sector up to now. More encouragement is necessary from the government to sustain this growth," Mr Dimech said.