Tax impacts on Zimbabwe tourism sector

Zimbabwe’s 15 percent value-added tax on foreign tourists, introduced early this year, has started to impact on arrivals and revenue flows, an industry body said yesterday.

Finance Minister Patrick Chinamasa has introduced the VAT on foreign tourists’ payments for accommodation and tourism-related services, which were previously exempted.

The Zimbabwe Council for Tourism (ZCT) said the measure, which has also been criticized by Tourism Minister Walter Mzembi, would make the country more expensive and less competitive than its regional peers.

Tourism is one of Zimbabwe’s main foreign currency earners, generating $827 million in 2014, down from $856 million in 2013.

Zimbabwe’s tourist arrivals increased by 2.6 percent to 1 880 028 in 2014 from 1 832 583 recorded the previous year, but the figure was still below the overall regional growth of seven percent.

ZCT chief executive, Paul Matamisa told journalists during a briefing that players in the sector were now feeling the negative effects of the tax through declining business.

“During the first month of the introduction of the 15 percent vat, one operator in Victoria Falls lost over $50 000 worth of business in one month. We are continuously getting letters and emails of business that is being lost from our resorts,” he said.

He said  Kariba recently lost a group of 12 South African tourists who opted to go elsewhere and an American family that frequented the resort town annually that chose to go to Zanzibar in Tanzania because of the tax.

Matamisa said South Africa, Botswana, Zambia had lower tourism tax rates than Zimbabwe, adding that there was need to interrogate the pricing structure in the country after dollarization.

Some of the businesses, he said, were now sharing the tax with the tourists to reduce the burden on them.

“As a nation we cannot laugh it off and say that it’s only one tourist who went to Zanzibar, we can recover. We can’t recover, we need every single tourist that we can get,” he said.

Matamisa said the country was struggling to increase tourist arrivals from traditional markets such as Australia, Asia, Europe and the US from the current 240 000 to 600 000 at the peak in 1999.

ZCT president, Francis Ngwenya said the country remained an expensive destination compared to its regional peers because of high cost drivers such as taxes.

“It’s even difficult for us to come up with attractive rates for domestic and regional markets,” Ngwenya said, adding that some products were 35 percent more expensive than in some regional countries.

“As a national strategy we should lure tourists from target lucrative markets and get volumes we require and they will spend money on shopping, transport, food.”

Matamisa complained about high municipal charges after the Victoria Falls council, which hosts the country’s premier resort, recently increased its tariffs by over 600 percent.

“We are in a deflationary situation and someone raising a figure by over 600 percent gives an impression they were not charging yet they were getting quite a substantial amount from operators,” Matamisa said.

“We are appealing to local authorities to be responsible and understand the situation with the economy and business. They have a very important role in terms of facilitating business not to milk the business to a standstill.”-The Source

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