‘VAT a threat to tourism growth’

Business Reporter—
Government’s vision to grow tourism into a $5 billion industry by 2020 is under threat from the negative impact of the value added tax on foreign hotel accommodation sales, a tourism lobby group said. Zimbabwe Council for Tourism president Mr Francis Ngwenya told a media briefing in Harare yesterday that the VAT on all foreign hotel accommodation sales has been “exceptionally unhelpful, if not destructive”.

Hotels in Zimbabwe have been subjected to the 15 percent VAT on accommodation for foreign visitors since mid-January this year, with its application having been delayed from the initial date of January 1, 2014. Mr Ngwenya said Government eventually proceeded to introduce the VAT under confusing circumstances despite spirited opposition by hotel operators against the tax.

“At threat are growth of tourism, viability of hospitality operators and future of the much lauded plan to create $5 billion tourism economy by 2020,” he said. The ZCT president said the adverse effect of the tax has been confirmed by a local economic think tank.

“A recent study commissioned by ZCT and undertaken by Zimbabwe Economic Policy Analysis and Research Unit shows that VAT applied on foreign accommodation bills has a definite and scientifically recognisable adverse effect on the sector.”

According to Tourism and Hospitality Industry Minister Walter Mzembi the relatively new National Tourism Policy is intended to address bottlenecks to travel, such as air connectivity; restrictive visa regimes and processes; poor road access; poor utilities; which restrict growth of tourism, supports and encourages women’s initiatives in main stream tourism.

The tourism lobby group has suggested reduction of the VAT on accommodation to foreign visitors to a single digit number in order to continue attracting visitors. “We want to grow volumes. To grow volumes we need to use all the tools; price (and) product. The operators are going out of their way to reduce costs to come up with more competitive propositions and prices and we are basically trying to create the jobs that are required; it’s a volumes business,” Mr Ngwenya said.

The ZCT president said several European countries reduced VAT on foreign hotel accommodation and realised huge benefits in the form of increased tourist inflows and revenue from the sector.

Tourist arrivals into Zimbabwe in the first half of this year grew by 7 percent to 980 276 driven by main land Africa, according to the Zimbabwe Tourism Authority. ZTA believes the number of visitors could be higher if cumbersome visa process and delays at border posts were sorted out. In the half of last year arrivals were at 867 163.

Mr Ngwenya said it was also critically important for Zimbabwe to market the country as a prime tourist destination in traditional markets and new one such as the BRICS.

The tourism industry accounts for an average of 12 percent of the country’s $14 billion gross domestic product and is one of the four main pillars of the economy. The tourism industry operators have in the recent past also raised concern over a 264 percent hike of rates by the municipality of Victoria Falls, Zimbabwe’s most iconic tourist resort. He said increasing rates was not only outrageous, but could negatively affect tourism.

“The travel and tourism industry remains in a state of depression, the result of a number of factors, and national effort to revive its fortunes and grow it into Zimbabwe’s most cherished and valuable economic sector were being sabotaged through such foolish initiatives.” The increase has since been reversed with a view to come up with a more economically sensible tariff adjustment.

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