New tax to make Zim tourism more expensive

Golden Sibanda Senior Business Reporter
THE 15 percent value added tax on foreign hotel accommodation bookings is a significant additional cost that will make Zimbabwe a more expensive destination in the region, the Zimbabwe Tourism Authority has said. ZTA chief executive Mr Karikoga Kaseke said last week that in other foreign jurisdictions, a 15 percent tax could be assimilated into the cost structure of operators without significant impact on the price paid by tourists.

But unfortunately this has been introduced in an environment where the monetary system is dominated by a currency that is already too strong compared to most across the globe and its introduction will push up hotel rates.

“It (the tax) is going to increase accommodation rates from next year. That (15 percent tax) is a very big issue.

“We have agreed with the industry that they are going to pay, but they cannot change the rates for this year. This is eroding their viability and eating into their profits,” Mr Kaseke said.

Mr Kaseke said the industry has, however, not yet given up on the possibility of authorities scrapping or reducing the tax, adding it was hampering industry viability, as it cannot change rates decided at the beginning of the year.

“They cannot not increase their rates by 15 percent, it will be disastrous,” said Mr Kaseke adding “We are hopeful something will be achieved. He said efforts to persuade authorities to review the tax were underway.

Already, businesses in Zimbabwe face a litany of charges, rates and levies, some industry specific, others cutting across sectors such as income tax and high labour rates, which make doing business expensive.

The levy caught the tourism industry unawares, as Finance and Economic Development Minister Patrick Chinamasa never hinted on it when he presented his $4,2 billion 2015 National BudgetStatement late last year.

But its introduction was apparently ad hoc because Treasury wanted to shore up its coffers on the back of missed revenue targets due to a struggling domestic economy.

Tourism and Hospitality Industry Minister Walter Mzembi recently said that he would also persuade Parliament, fiscal authorities and impress upon the Zimbabwe Revenue Authority to look at the potential impact of the VAT.

The minister told The Herald Business after announcing the inaugural board for Mosi-Oa-Tunya Development Company that there had not been adequate consultation on the tax prior to its implementation by authorities.

According to the 2015 National Budget, the tourism industry, which generated $827 million in 2014, accounted for 11 percent of the national gross domestic product, marginally behind agriculture and mining.