Government tourism tax costly to the sector, say parliamentarians

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PARLIAMENT has urged government to consider dropping a controversial tax on tourists which is said to have turned the country into a “very expensive tourist destination”.
In a report presented to the national assembly Tuesday, Zanu PF lawmaker Anastancia Ndlovu, who chairs the parliamentary portfolio committee on tourism and hospitality, recommended that government introduces “creative and intelligent”.
“The committee strongly recommends that the executive totally suspend the VAT (Value Added Tax) for foreign tourists with effect from 1st August 2015 until 2019, for the sector to recover, grow volumes, allow the many potential dividends from the UNTWO (United Nations World Tourism Authority) to pay off and increase direct arrivals at the new Victoria Falls Airport,” reads Ndlovu’s report.
Early this year, government, through a statutory instrument, introduced a new tax regime in a bid to make the much needed cash as the economic squeeze continues to bite.
The tax would be charged on travellers and tourists arriving in the country.
But critics said the move would affect efforts to re-brand Zimbabwe following years of stagnation in the industry because of negative publicity and scorched earth economic policies.
Tourism minister Walter Mzembi reacted angrily to the introduction of the tax then, arguing it was counter-productive and would have a negative effect on his department’s efforts to grow the country’s share of tourist arrivals.
Tourism stakeholders argued that the levy that also included accommodation could make the country a more expensive destination, dampening efforts to revive the depressed sector.
Ndlovu’s report said tax charges for hotel accommodation for source markets were much lower in neighbouring countries than the standard rate and that if the same were to be implemented in the country, tourism players would compete favourably.
“Thus the 15 percent VAT introduced by the government becomes a significant cost for overseas market and would be very difficult for the local operators to absorb. Investors are likely to consider our industry as non-profitable and one that does not give returns,” the report added.
The report also found that the cost of doing business in the country was prohibitive for the tourism sector which finds it difficult to keep their prices competitive.Advertisement

According to Ndlovu, government could introduce VAT on foreign arrivals on an incremental basis “as in phases of 3 percent, 5 percent and 7 percent beginning in 2016 because it is economically destructive to introduce 15 percent all at once. There is severe damage pending if this continues”.
Speaker of Parliament Jacob Mudenda said the report had been noted by the legislature.