Govt imposes tourism tax

via Govt imposes tourism tax – DailyNews Live 28 January 2015 by John Kachembere

HARARE – Zimbabwe’s hard pressed government has started effecting the disputed 15 percent value added tax (VAT) on foreign tourists despite attempts by tour operators to block the levy.

Hospitality industry players argue that the tax — levied on foreign tourists’ accommodation — could make Zimbabwe a more expensive tourism destination, dampening efforts to revive the depressed sector.

Last week, government gazetted the Statutory Instrument that enables it to charge the tax.

However, other tourism services such as restaurants, bars and leisure activities will remain zero-rated.

The move comes as a shock to many industry stakeholders who were early this month assured by Tourism minister Walter Mzembi that negotiations were still on-going in government to keep the Vat exemption in place.

“We are still negotiating at ministerial level. Introducing that 15 percent will not be an intelligent move at a time when we are still trying to revive the sector,” Mzembi said early this month.

He added that the tax would only make the country a more expensive destination for tourists at a time when the industry is struggling for competitiveness.

“Our tourism products are expensive compared to our competitors in the region. Factoring in this tax would obviously make us uncompetitive,” he said.

Previously foreign tourists’ payments for accommodation and tourism-related services were exempted from the Vat, introduced in 2003, as part of efforts to promote the sector’s growth.

While government had indicated its intention to restore VAT on tourism as early as 2013 to boost its coffers, Finance minister Patrick Chinamasa did not mention the tax in his 2015 budget announcement — prompting stakeholders to think it had been shelved.

Brent Williamson, owner of Adventure Zone and Lodge, said the tourism industry was not adequately informed on the Vat developments.

“We have only now been advised by a Gazette dated 16 January that the VAT is effective immediately, leaving us already liable for losses for the past four days not to mention the people who have already been quoted for their stay in the future,” he said.

Beks Ndlovu, the chief executive of African Bush Camps noted that while the industry was forewarned in May 2014 of the possible implementation of Vat, no clarity was given on when it would be implemented and legislated, which led to frustration and confusion.

“By January 1, no clarity had been given on what would happen to confirmed bookings already in place, which services would be affected, and no legal instrument had been announced or gazetted,” said Ndlovu.

He added that the lack of communication had resulted in operators assuming that the requests to hold off on implementing VAT at this stage had been taken on board.

“The Industry therefore revised rates accordingly, excluding the VAT, only to be informed that the VAT has now been published and implemented via the official Gazette.

“This has certainly caused anxiety and unnecessary confusion in the market place as whole.”

Immediate past president of the Zimbabwe Council for Tourism, Glenn Stutchbury, recently said the 15 percent VAT would render hotels uncompetitive and reverse recent gains achieved in tourist arrival figures.

“The imposition of VAT will effectively increase prices by 15 percent and this will unquestionably make us uncompetitive and result in reduced numbers of tourists visiting the country,” he said.

“Such a development would be a setback for an industry slowly climbing out of a decade-long recession and would hinder the travel and tourism sector’s drive to increase visitor arrivals and thereby increase foreign currency earnings by the sector,” added Stutchbury.