The battle lines are now clearly drawn in Tanzania between the country’s tourism industry and the government, after President Magufuli told the sector off over their dissent about the Value Added Tax (VAT) of 18 percent, which was unexpectedly heaped on services across the board, national park entrance fees included.
During a function at State House, the President in fact added salt to the wounds of the tourism industry when he told them that those not willing or able to pay the added cost should stay away and that the country did not need tourists who were not paying taxes. He was specific that it was better to have just half a million tourists who pay VAT than a million who do not pay VAT.
“It makes no sense to attract a big number of tourists but fail to benefit from them,” he was quoted to have said to the utter dismay of one of the country’s leading economic sectors.
Reactions, all on condition of anonymity, were swift and harsh, with some counseling their President to take a class in economics first before making such utterances and pointing to the lessons Kenya had to learn when that country added VAT, only to withdraw the measure two years later after disastrous results vis-a-vis tourism arrivals.
“President Magufuli has been misled by some of his advisors that the impact of the VAT can be neglected. This is far from the truth, however. Already we have thousands of cancellations for safaris after prices rose by an average 20 percent from one day to the next. What none of those bureaucrats appreciates is that once prices are quoted, there is a legal foundation to stick to them for several months. In particular in Europe, consumer protection laws are prohibiting to pass on price increases and so who pays for the VAT now” It is either us or the tour operators overseas, and neither can absorb such exorbitant increases without going broke.
“Such tax measures, if at all, need to come with sufficient notice to allow revision of quotations. Anyway, as we have discussed, let the figures speak for themselves when the statistics come out. I and my colleagues all predict a big hit on our arrival numbers, not just for safaris but across the board,” added one regular source from Arusha earlier in the day to a chorus of voices from across the tourism sector in Tanzania, which overwhelmingly felt let down.
“Me, I blame our tourism minister for failing us. He should have taken our sentiments on board and spoken in our favor. That man will have a very difficult life from now on when he comes to deal with us, because we really have lost all respect for him. There is a big amount of arrogance in what he said, and there inevitably are consequences. A few months into his job, he is already the biggest failure among tourism ministers,” ranted another regular source echoing the sentiments expressed in messages and mails received.
Others termed President Magufuli’s decision as the first major mistake in his presidency with one other regular contributor saying something to the effect that arrogance comes before the fall, besides a range of other utterances not fit to be repeated here.
Feedback from the region was also swift, and in particular Kenyan operators showed some glee over the prospect of safari traffic coming their way as Kenya’s tourism industry, since the budget this year no longer pays VAT on tourism services, lowering the cost of safaris on a broad basis.
A few expressed their sympathy with their Tanzanian counterparts, especially those from tourism associations, one of them quipping: “We went through the same troubles, and our government learned the hard way what a mistake they made. That came sadly with loss of jobs and companies closing down, and I can only wish my colleagues in Tanzania the best as they go into the same downward spin we experienced over the past years.”
For now, it is watch and see, and all eyes will be on the arrival statistics for the period from July onwards this year, when they become available, to let the facts speak and show, just how massive the impact of VAT on the sector will be.