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Lungelo Ndhlovu Business Correspondent
TOURISM and Hospitality Industry Minister Walter Mzembi says the gazetting of a 15 percent tourism levy by government was a rushed decision that would affect the competitiveness of the country’s tourism sector.The government recently introduced a 15 percent value added tax (VAT) on foreign tourists in a bid to tap more revenue from the growing sector, which clocked five percent growth in 2014.
Minister Mzembi told Business Chronicle that while taxation was a necessity, it should not be used to prevent tourists from coming into the country.
“How do we get their (tourists’) money when we prevent them from coming by putting such prohibitive tax measures? Already, the sector has started receiving cancellations of bookings,” said Minister Mzembi.
“We need to remember that the tourists of today are no longer dogmatic. They want value for their money. In an environment where you’re competing with other brands in the region, our pricing model and taxation in particular, must not end up impeding tourism business.”
Finance Minister Patrick Chinamasa made the proposal for the new tax in the 2014 national budget, which was, however, postponed to January 2015 following an outcry from tour operators.
“It’s a question of cost-benefit now. What I would hope, going forward, is that we don’t tax people upon entry into the country,” added Minister Mzembi.
He said there was no sufficient consultation before the implementation of the tax regime hence the outcry.
“I’m raising these reservations because we haven’t had a conversation about it, thus, showing serious policy dissonance and how disjointed we’re in our co-ordinating efforts in this economy.
“I’m convinced that a cost-benefit analysis would’ve been critical first before proceeding to gazette the 15 percent tourism levy,” he said.
He said he would continue negotiations with Minister Chinamasa to find a common ground on the issue.
“I’ve in the past suggested staggering the tourism tax, say by five percent in the first five years, then 10 percent in the second five years, until we get to 15 percent. We then make it known to the source markets on time in terms of our tax plan. The major concern is that this tax has abruptly been put into effect when tourism operators had already sold their packages in source markets,” said the minister.
In tourism, packages are sold two, three years or five years in advance, which would mean that tourists would have to meet extra costs arising from any new taxes introduced in the intervening periods, he argued.
“I urge our counterparts in the treasury to appreciate this position. I’m told tourists are cancelling their bookings some of which were done last year in Durban and at Sanganai/Hlanganani here in Harare. Those cancellations have serious consequences on the overall performance of the sector and brand equity of the destination,” he said.
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