The tourism industry has joined calls for withdrawal of the proposed VAT Bill 2012 warning that it risks slowing down the sector growth and new investments. Tourism stakeholders represented umbrella body Kenya Tourism Federation whose membership is drawn from all professional organizations in the industry yesterday warned that national carrier Kenya Airways alone stands to lose about Sh22 billion if the bill is passed.
“The impact will be quite huge. Just a 16 per cent application of VAT on food alone is likely to push the cost of doing business in hotels by more than 30 per cent,” noted Kenya Association of HotelKeepers and Caterers CEO Mike Macharia during a press briefing yesterday.
Aside from some of the hotel items that are exempt from tax, tour operators have also enjoyed exemption of transportation of tourists. If VAT Billl 2012 is enacted, it could mean increasing the cost of tours in the country and could affect Kenya’s competitive edge as a destination. The contentious was to be introduced in parliament on Tuesday but it was put on hold due to Finance Minister Njeru Githae’s absence in parliament then.
Some MPs have also raised objections to the proposals under the VAT Bill because of its implications to the crucial agricultural sector and price of essential commodities like milk and flour.
Players in the agricultural industry who have for a long time enjoyed exemptions on agricultural inputs were the first to raise the alarm over the VAT Bill. The tourism players also took the opportunity to complain over recent parastatal board appointments made by the Minister of Tourism adding that they were not consulted and it was done in contravention of the new Tourism Act 2011 which is pending implementation.
KTF chairperson Lucy Karume said the immediate former directors of the six parastatals should have been left to finish their terms or if a revocation was necessary they should have been briefed prior to the dismissal.
“The minister is blatantly ignoring the industry stakeholders but we want to make it clear that we want to work with the government,” remarked Karume.