A proposed 18% VAT on tourism services in Tanzania works against the government’s goal of increasing tourist numbers to two million in 2017, industry experts say.
Sirili Akko, Executive Secretary of the Tanzania Association of Tour Operators (TATO), said Dr Philip Mpango, Minister of Finance, had proposed an 18% VAT charge on tourist services in his recent budget, with effect from July 1.
Tourism services mentioned in the budget that could be taxed include supplies of tourist guiding services, game drives, water safaris, animal or bird watching, park entrance fees, and ground transportation services.
“So far, Tanzania is still below the target in 2016 in comparison with the 2013/14 tourists’ numbers,” said Akko of tourist arrivals.
He said Kenya was more competitive because the Kenyan government had allocated €36 million, as well as incentives, to the tourism industry.
Wilbard Chambulo, Managing Director at Kibo Guides and Tanganyika Wilderness Camps, said Kenya had introduced 16% VAT on tourism in 2015/16 and failed.
“Tanzania should avoid the same mistake, otherwise our neighbours will capitalise and have a free ride on our mistakes,” adds Akko.
Chambulo said the VAT would negatively impact the tourism industry. He also pointed out that the July deadline did not allow time to implement the charge and asked who would bear the extra cost. “We have sold our safaris well in advance, some have been paid in full or deposits received. We are dealing with international operators where brochures go out a year or two years in advance with rates.”
Chambulo said that Kenya removed the VAT on tourism on national park entry fees and invested $50 million dollars to market the country. “Tanzania wants to impose VAT on tourism services and not a cent is available for marketing Tanzania.”
Akko also said honest tour operators and travel agents should not be punished for the many unregistered companies that operated and denied government the revenue. “TATO is open and willing to work with the government in widening the tax base and dealing with dishonest operators.”