Tanzania imminent VAT tax on tourism to bury the travel and tourism industry? Tanzania’s proposed VAT on tourism is likely to bring the multi-billion-dollar industry to its knees in the wake of Ebola disease and the current World economic volatility. The outbreak of the Ebola virus in West Africa, Ukraine and Middle East crises are threatening the tourism industry—as travelers cancel their trips in Africa massively, Tanzania inclusive, on fear of the virus and economic uncertainty back home. “We are greatly worried over the state plan to impose VAT on tourism anytime soon in the face of Ebola virus and the ongoing crises in Ukraine and Middle East. The move will paralyze the tourism industry” says Tanzania Association of Tour Operators (TATO) Vice-Chairman, Zuher Fazal said. During the fiscal year 2013/2014 the government sought to abolish the hitherto existing VAT exemption on tourist services, but tour operators say the move is a death warrant for a multi-billion-dollar industry. In his presentation to the deputy Minister of Finance, Mwigulu Nchemba in Dar es Salaam on Tuesday, Mr Fazal said tourism is an export, and like other exports of services qualifies for VAT exemption or zero rating, particularly this time around. TATO boss told the minister that tour operators and travel agencies are “intermediary” services, which are normally not subject to VAT. “Tour operators work on forward bookings with commitments of up to two years in advance and bound by international trade protocols” he explained. Charging VAT on tourist services will make them extremely expensive and place the Tanzanian tourism industry in a disadvantaged position due to regional and international parities. According to Mr Fazal who has a vast experience in the industry, tourist services have high demand elasticity as consumers have a wide choice of attractive destinations worldwide. “Tourists are very fragile and sensitive to adverse changes and events in tourist destination territories,” he told the minister. For his part, Minister Nchemba allayed TATO official fears that it was the best interest of the government to create a conducive business environment, which will not kill the geese that lays the golden eggs. Growing at a steady rate for the past two years, Tanzania tourism is booming with latest data confirming the industry as Tanzania’s top foreign currency earner and export sector, outshining the gold. Fresh figures from central bank indicate that the tourism brought in $1.973 billion during the year ended June 2014, up from $1.757 billion earned in previous corresponding year. Recent statistics show that earnings from the Tanzanian tourism industry increased from $200 million in 1993 to $1.88 billion in 2013. The number of visitors also increased over the same period from 230,000 to a record one million. The reported number of tourists who visited Tanzania in 2012 places the country on the map of leading African safari destinations with million-plus visitors per year. Other tourist competitive African destinations, rich with resources and which have a high record of tourists reaching a million or above are Kenya, Zimbabwe, Botswana, Namibia, Zambia and South Af
Posted on: Sat, 20 Sep 2014 10:16:13 +0000
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