TANZANIA: Scrap Value-Added Tax Charge, Tour Operators Demand

Tanzania Tourism operators have raised their voice over the Value-Added Tax (VAT) on tourism services announced in the national budget proposal last week in Parliament, and which they want it scrapped.

Unveiling the 2016/2017 government budget proposals in Dodoma, the Finance and Planning Minister, Dr Phillip Mpango, said the government would impose VAT on tourism services, including supplies of tourist guides, game driving, water safaris, animal or bird watching, park fees and ground transport services in the coming fiscal year.

Tanzania Association of Tour Operators (TATO) Executive Secretary, Sirili Akko, said in a statement that the VAT charges for tourism industry would be counterproductive and will hamper growth of the sector which contributes to nearly 17 per cent of the GDP.

The umbrella organizations, according to Akko, expressed serious concerns on the cross cutting negative consequences of the tax measures on the tourism industry.

He said TATO, among leading tourism players, was worried they will lose their business to Kenya and other tourist destinations where VAT in tourism is zero-rated as VAT on the tourism services would make Tanzania a more expensive tourist destination.

Tanzania tour operators, according to TATO, are already subjected to 32 different taxes, 12 related to business registration and regulatory licence fees as well as 11 duties for each tourist vehicle per annum, and nine others.

According to him, Kenya had imposed VAT on tourism services in 2015 but it has rescinded the move this year after learning it was counterproductive.

"Kenya learned a hard lesson in 2015 when it imposed VAT on tourist services, thanks to a quick rebound which seeks to restore their competitiveness and glory in the tourism sector," he said adding: "Tanzania should avoid the same mistake.

The TATO Executive Officer said the organization was urging the government to reconsider the plan for VAT on tourism services as that would risk the reputation of Tanzania as a reliable safari destination and cautioned that it would have long-term negative consequences which will not be easy to correct.

Entry to national parks (park fees) is now VAT exempt and the same applies to commissions paid to tour operators.

Charging VAT on tourist services will make them expensive and place the Tanzanian tourism industry in a disadvantaged position due to regional and international parities, TATO argues.

Tourism is the leading sector in generating foreign exchange for Tanzania. Available statistics indicate that it attracted an income of 2.04 billion US dollars last year, up from 1.9 billion dollars in 2014.

Tourism is the leading sector in generating foreign exchange for Tanzania. Available statistics indicate that it attracted 1.1 million tourists in 2015 and an income of 1.93 billion US dollars, lower from 2 billion US dollars earned in 2014 with 1.2 million tourists.