via VAT on accommodation for non-residents to be scrapped | The Herald February 25, 2014 by Paidamoyo Nyakudzambara
Ministry of Tourism and Hospitality is engaged in a dialogue with the Ministry of Finance and Economic Development over the scrapping of a 15 percent Value Added Tax on accommodation services for non-resident tourists, an official confirmed. In the 2014 national budget, it was proposed that VAT be imposed on payments for accommodation and tourism services by foreign visitors.
The move invoked outcries among hotel industry players who opposed the move urging a rethink in the best interests not only of the travel and tourism sector, but of the whole economy.
Minister of Tourism and Hospitality Walter Mzembi said he received a petition from the hospitality industry pleading for the scraping of VAT.
“I am in dialogue with Minister of Finance and Economic Development over the issue which either myself nor the sector were consulted on, and I am yet to establish the source of this ‘wisdom’ which has no successful precedence anywhere or elsewhere in the world,” Minister Mzembi said in a statement.
He said Minister Patrick Chinamasa accepted to have a meeting to make sure issues surrounding VAT are discussed.
“Minister Chinamasa has agreed to a policy dialogue over the matter which I am confident will allow superior arguments to prevail for the survival and growth of the sector,” he said.
According to industry players the imposition of VAT is going to increase prices by 15percent and this was going to make them uncompetitive and result in reduced numbers of tourists visiting the country.
Cresta hotels chief executive Mr Glen Stutchbury last month said the introduction of VAT is going to be a setback for an industry slowly climbing out of a decade long recession.
He said VAT would negatively affect travel and tourism sector’s drive to increase arrivals and foreign currency earnings.
“Hoteliers were embarking on an exercise to engage authorities in discussions on the issue. We need the plan shelved for a minimum of five years.
“Until now it has been national policy not to charge VAT on foreigners’ payments on accommodation and tourism-related services,” he said
When the VAT system was introduced in 2003, the travel and tourism sector was recognised as an exporter, exempt from VAT on foreign visitors’ payments.
Mr Stutchbury said the sector now felt strongly that after a slow but determined emergence from a 13-year period of depressed trading, the time was not right to undertake action that would have a detrimental effect on growth.
Such an impact would result in a drop in tourist arrivals with reduced growth for the travel and tourism sector and either stagnation or reduction in employment levels.