Tourism Minister Walter Mzembi
PARLIAMENT has implored government to completely scrap off the 15 percent Valued Added Tax (VAT) on foreign tourists introduced by Finance and Economic Development Minister, Patrick Chinamasa, last year saying the sector will be severely crippled if the tax remains.
The sector has of late been on the decline, mainly owing to dwindling overseas arrivals.
According to the 2015 World Economic Forum Travel and Tourism Competitive report, Zimbabwe is among some of the world’s worst tourist destinations, ranked at 115 out of 141 countries.
Although government figures show that tourism operators have already started remitting proceeds from the 15 percent VAT to the taxman, many feel that the threshold is not sustainable in the long-run.
Others have gone to the extent of asking government to remove it altogether.
Between January and April this year, the Zimbabwe Revenue Authority has collected in excess of US$1,65 million from foreign tourists.
The Parliamentary Portfolio Committee on Environment, Water, Tourism and Hospitality Industry made an inquiry into the impact of the 15 percent VAT on foreign tourists from the beginning of the year. It found out that instead of being progressive, the new levy was plunging the promising tourism sector into the backwaters.
Based on its findings, it has recommended that government “axe the tax” to allow airports to become more competitive, while stimulating jobs and tourism growth.
This was after the committee — during its inquiry — discovered that, following the introduction of the tax, growth in the tourism sector — projected to pour in US$5 billion by 2018 — was slowing down.
“The growth in the sector is not very good,” said the committee in its report submitted to the National Assembly by its chairperson, Annahstazia Ndlovu, recently.
“Tourism room nights are at low occupancies. In light of the introduction of tax on tourism, specifically on air tickets for all flights as well as on hotel rooms, the task to lure foreign tourists would be made more difficult. A continental levy that is also being proposed by the African Union on tourism would threaten the competitiveness of the country as a destination,” it further reads.
The committee advised that in order to boost the sector, there was need to attract high spenders from European markets as Zimbabwe currently endures very low percentages of visitors from overseas.
“The issues which emerged important, pivotal and critical is the urgent need for the government to consider scrapping off the 15 percent VAT payments for accommodation and tourism services by foreign visitors,” the report reads in part.
“The 15 percent VAT on foreign tourist arrivals in Zimbabwe negatively affects the destination competitiveness and the growth of the tourism industry. Tax charges for hotel accommodation for source markets are much lower than the standard rate, thus the tax becomes a significant cost for the overseas market and would be very difficult for the local operators to absorb,” the report further reads. It also states that the tax will be a disincentive in the sector with regards to investment potential and “can set the industry behind by several years and it will be costly to recover”.
The hard-hitting report further says the introduction of the 15 percent VAT would result in 40 percent job losses as foreign tourists, on whom the sector is largely reliant, and investors shun Zimbabwe.
The committee also established during its inquiry that some of Zimbabwe’s tourism products are now 35 percent more expensive compared to some regional markets, which means potential arrivals could opt for cheaper destinations.
Tourism Minister Walter Mzembi has already previously complained that the tax could price Zimbabwe out of the market.
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