TANZANIA (eTN) – Tourism stands the leading economic sector in Tanzania, but it has been hit hard by multiple taxes imposed on tourist services through the annual budget tabled to the Tanzanian parliament on Wednesday of this week.
The unfriendly tourist budget that was set for implementation from July of this year, to end in June of next year, has not identified tourism among the key priority sectors that would speed up the Tanzanian economy, hence poverty reduction among the Tanzanian people.
In his budget speech that was televised live across Tanzania on Wednesday, Tanzania’s Finance Minister, Dr. Phillip Mpango, imposed a value added tax (VAT) on tourism services, including supplies of tourist guiding, game driving, water safaris, animal and bird watching, park fees, and ground transport services.
“This measure was put in abeyance during the inception of the new VAT Act in July 2015 in order to provide for the operators to conclude their contractual obligations entered with tourists in a year,” Dr. Mpango said.
The Value Added Tax has been imposed on similar services in neighboring countries like Kenya, Rwanda, and South Africa, he added.
But tourism industry players are worried they will lose their business to other African safari destinations.
A section of tourist investors said it was wrong to impose VAT on tourist services, pointing out that usually tourists do not take anything out of the country; they just come to gaze at wildlife and leave.
The safari operators warned that VAT on tourism will make Tanzania a very expensive destination, and foreigners may start opting for other countries where prices for safaris are much cheaper.
Local tourist hotel operators pay about 55 different government taxes and levies in different categories.
Tourism-related segments that will be subject to Value Added Tax include tour guided game viewing, water and sea sports, animal and bird watching, accommodation, park fees, tourist chatter services, ground transport, and transit services.
For the operators, however, the move will be a hard hit to the Tanzania tourism industry, making the destination uncompetitive. They said potential tourists could cancel their trips to Tanzania.
Kenya, Tanzania’s leading safari destination, has to this end allocated KSh 4.5 billion (US$45 million) for tourism promotion activities, in addition to some tax incentives that will be announced shortly.
Kenyan Finance Minister Henry Rotich proposed to remove the Value Added Tax (VAT) on park entrance fees in his annual budget speech.
Four East African nations tabled their annual budget speeches on Wednesday.
Tanzania’s tourism sector is a key economic sector and had attracted one million tourists last year who generated US$2.04 billion against the US$1.9 billion gained the previous year.
Tanzania Tourist Board had so far predicted to see over two million tourists visiting Tanzania next year.