WHILE the introduction of the 15% Value Added Tax (VAT) on foreign accommodation will have a negative effect on the growth of tourism in the country, it will also not guarantee government the desired increase in revenue, Tourism minister Walter Mzembi has warned.
Mzembi last week told a parliamentary portfolio committee on Water, Climate and Environment that his ministry has failed to convince Finance minister Patrick Chinamasa to scrap the 15% tax on accommodation for foreign visitors, which he says makes the country a more expensive and thus less competitive tourism destination.
“We had several representations to Chinamasa including a meeting held on the 17th of April 2014 at Meikles Hotel where he agreed to defer the tax implementation. Regardless of several representations to him on the matter, no feedback was given only for the Statutory Instrument to be published on 16 January 2015,” Mzembi said.
According to the 2015 World Economic Forum Travel and Tourism Competitive Report released a fortnight ago, Zimbabwe is ranked among the worst tourism destinations in the world at 115th out of 141 countries.
Mzembi said the introduction of VAT on accommodation services for foreign tourists would have the effect of worsening the already prohibitive pricing structure in the country and warding off potential tourists.
“Taxing tourism may seem appealing and the easiest thing to do, however, it is important to take note that already this sector is contributing the most towards revenue when the bulk of taxes along the multiplier-value chain are aggregated,” he said.
Mzembi added: “However, we observe that implementing a VAT charge such as this may only serve to boost government coffers in the short term, but the long term implications are serious.
“I bring from the sector a suggestion to incrementally introduce VAT within the range of 5 to 15% aligned to our 5:5:15: 2020 Vision to give it the opportunity to recover and grow, rather than to impose abruptly a full-blown 15% Tax that will certainly kill the goose that lays the golden egg.”
Secretary-general of the UNWTO, Taleb Rifai is on record as saying: “Tourism tax in Africa is a threat to the competiveness of the region and to all African economies which have tourism as a key pillar to their development”.
Closer to home South Africa exempts VAT on accommodation and has a tax reimbursable policy on all tourists upon departure. It has managed to grow a US$12-13 billion tourism sector.