PLAYERS in the tourism industry are in talks with the government over the 15% value added tax (VAT) introduced on foreign receipts last year, with a view of having it reduced or waived, industry officials have said.
The 2014 national budget extended VAT on accommodation services for non-resident tourists after being exempted when the government introduced VAT in 2003, as part of efforts to promote the sector’s growth.
However, Finance minister Patrick Chinamasa in 2014 proposed to remove the exemption in a bid to shore up dwindling government revenues, although he did not formalise the proposal when he presented the 2015 national budget last November.
The move was, however, challenged by players in the sector who argued it would hit the sector hard at a time it was showing signs of recovery.
Tourism minister Walter Mzembi described the move as not “intelligent” as it would only make the country a more expensive destination for tourists.
Last month, Zimbabwe Revenue Authority Commissioner-General Gershem Pasi said the 15% tax charged on foreign tourists would remain, despite protestations that it could slow the growth of the sector.
Asked to comment on the current status of the tourism industry, Hospitality Association of Zimbabwe president Tamuka Macheka said he could not do so because they were currently in protracted talks with the government over the 15% VAT levy.
“I’m sorry that I will not be able to comment on those issues because we agreed as an industry not to do so until we finalise our negotiations with the government over the 15% VAT levy. We are afraid of jeopardising everything before we reach consensus,” said Macheka.
Employers’ Association of Tourism and Safari Operators president Clement Mukwasi also confirmed to Southern Eye Business that the tourism industry and the government were in talks with a view of scrapping the 15% VAT levy.
“Yes, it is true that the tourism industry and government are in talks concerning the 15% VAT levy. Unfortunately, I cannot give you the full details because the issue is being spearheaded by the Zimbabwe Council for Tourism,” Mukwasi said.
Mukwasi said tourism had been on a recovery path, but due to the introduction of the 15% VAT levy, it had begun to slow down.
“The 15% will not help the industry to grow because it is not an incentive in trying to increase tourist arrivals and the government should look at it. I think the government should allow the industry to grow first and then introduce the 15% levy later,” he added.
He said between January and February this year, business was very gloomy and “we are operating at 23% to 27% below last year’s budget and we believe the 15% levy is contributing. We are not seeing any slight improvement and the picture looks gloomy”, Mukwasi said.
Tourism’s contribution to the economy is expected to grow to 15% by 2015.
In 2013, the sector improved by an estimated 3,4%.