This is why Bunge committee is sceptical on tourism VAT

Dodoma. Parliament’s Lands, Natural Resources and Tourism Committee said yesterday it is too early to conclude that the introduction of value-added tax (VAT) on tourism has had no adverse impact on the sector. This is despite revenue from the industry increasing.

When the government introduced VAT on tourism services in 2016, stakeholders complained that they were not consulted prior to the imposition.

It was feared that the decision would reduce tourism-related government revenue, partly as a result of tourist booking cancellations.

But government statistics indicate that tourism revenue increased from $2.1 billion in 2016 to $2.3 billion in 2017.

However, committee chairman Nape Nnauye said when presenting the team’s response to the Natural Resources and Tourism ministry’s 2018/19 budget proposals that the increase in tourism revenue was not enough evidence upon which to draw reliable conclusions on the taxation impact.

“It is better that the government conducts a thorough research into the matter so as to have full knowledge.

“The government must also identify other indicators for growth of tourism to identify areas for improvement, instead of the current indicators where the government just looks at the number of tourist arrivals and revenue,” Mr Nnauye said.

The committee also said it doubted if Tanzania’s tourism was really growing as claimed, as such decisions are currently founded on unreliable statistics.

According to the committee chairman, there indeed are statistics on tourist arrivals; but the data did not categorise the visitors who, for example, toured national parks, and who visited other types of attractions, both natural and manmade.

Tourist arrivals in Tanzania increased from 1,284,279 in 2016 to 1,327,143 in 2017, while tourism revenue increased from $2.1 billion to $2.3 billion during the same period.

“However, the committee has determined that the increase in revenue was largely due to the introduction of VAT tax on tourism services. With these statistics, it’s obvious that there is doubt that the tourism sector is really growing,” said Mr Nnauye.

Members of the committee were also concerned by what they said was an inadequate development budget.

They asked the government to hasten the payment of compensation to wildlife exporters whose licences were revoked.

Earlier, Natural Resources and Tourism minister Hamisi Kigwangalla tabled his ministry’s Sh115.79 billion budget for the next financial year. The proposed budget is 22.2 per cent lower than allocations endorsed for the current financial year.

Dr Kigwangalla said the government had reduced charges on tourist vans from $2,000 per five vehicles to $500 for between one and three vehicles.

As a result of those changes, the minister said, “the number of tourist agents increased from 606 in 2017 to 706 by April 2018. The government has also drafted regulations to guide tour operators in the country, a move that is aimed at ensuring the provision of better services to visitors”.

Tourism hunting blocks

The committee described last year’s decision by Dr Kigwangalla to cancel all licences for tourism hunting blocks – only to later reinstate them – as contrary to the existing laws and regulations.

“This decision denied the government revenue, and discouraged investors in hunting blocks. Our team advises the government to make sure it restores policy stability in the tourism sector,” Mr Nnauye said.