‘New tax law to dampen tourism’

via ‘New tax law to dampen tourism’ – DailyNews Live 3 FEBRUARY 2014

Zimbabwe’s hotels will become uncompetitive while recent improvements in tourist arrivals may be reversed if government’s plan to extend value added tax (Vat) to non-residents goes through, industry players warned.

Glenn Stutchbury, Cresta Hotels’ chief executive, said the imposition of the levy will effectively increase prices by 15 percent, rendering the country noncompetitive as a tourist destination.

Consequently, the hotelier said, foreign visitors’ numbers into the country will be reduced.

“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,” he said.

In the recent 2014 National Budget, Finance minister Patrick Chinamasa proposed that Vat be imposed on payments for accommodation and services by foreign tourists, a major reversal of the longstanding policy of not doing so.

However, hotels operating in the country are opposing the move and urging a rethink, in the best interests not only of the travel and tourism sector but of the whole economy.

Stutchbury noted that hoteliers were embarking on an exercise to engage the authorities in discussion on the issue and gain a shelving of the plan for a minimum of five years.

Until now it has been national policy not to charge Vat on foreigners payments of accommodation and tourism-related services and 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.

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 consequent reduced growth for the travel and tourism sector and either stagnation or reduction in employment levels.