adminGolden Sibanda Senior Business Reporter
THE Zimbabwe Council for Tourism has presented results of a research, which concluded that the country could lose millions if the full cost of the 15 percent value added tax on accommodation sales is passed on to foreign tourists .
ZCT chief executive officer Paul Matamisa said the research findings were submitted to Government last month through the Ministry of Tourism and Hospitality Industry and would now be discussed at the highest level for a decision to be taken.
In the meantime, he said that there had been no movement regarding revision of the VAT levied on foreign visitors hotel sales.
“The findings have been presented to the Ministry of Finance and Economic Development. It has gone to the right people, through the Ministry of Tourism and Hospitality Industry, where it should be discussed,” Mr Matamisa said.
The ZCT chief executive expressed hope the findings would convince Government to rethink it’s the issue of the 15 VAT on foreign hotel accommodation sales and act on it.
The study concluded that Zimbabwe could lose $124 million in tourist expenditure if tourism operators pass on the full cost of the 15 percent value added tax on foreign accommodation sales to visitors, research findings have shown.
The research noted that the revenue targeted by Government from the VAT on visitors would be a pittance compared to the lost tourist expenditure, as the tax was targeted at increasing revenue inflows to Treasury. Findings of the research into the impact of the VAT on tourism established that 75 percent of the tourists interviewed in the resort town of Victoria Falls would not revisit the country if the full cost was passed to them.
Based on the foreign tourist’s preferences, the research concluded that only an increase of at most 5 percent might not cause much movement in tourist to other countries.
The study carried out by the Zimbabwe Economic Policy Analysis and Research Unit says that “currently, there had not been much impact in terms of tourism arrivals, given that most operators decided to absorb the costs of the VAT.”
However, the decrease in the profits of hotels by about 27 percent, on average, also implies that the tax base for corporate tax payments to central Government would also decrease by a similar margin for hotels and lodges.
Notwithstanding the impact of the tax, ZEPARU said given the continued shrinking of the tax base, it is inevitable that the tourism industry should continue to contribute to tax revenue through other means as is happening to other sectors such as telecommunications, fuel retail, tobacco and others where taxes were introduced to get revenue.
“Thus, the VAT cannot be entirely removed, as in general there is some level of tax which is tolerated by the tourists. If the accommodation costs were to increase by 5 percent, there will not be much impact in the industry, and once tourists are used to the increase, a further 5 percent can be added on in subsequent years.”
Online Reporter