Let’s tread carefully on the tourism sector

Wednesday May 23 2018

Natural Resources and Tourism minister, Hamisi

Natural Resources and Tourism minister, Hamisi Kigwangalla 

Debate this week by MPs on whether value added tax (VAT) levied on tourism services is paying off provides food for thought. It is clear, however, that currently there aren’t enough parameters to go by on whether imposing tax on the tourism sector is a good move. From the outset, when such charges were introduced in the sector in 2016, stakeholders claimed they were not consulted, which would explain why there has been bickering on both sides.

We understand that the authorities’ move to introduce VAT in the sector was done in good faith, but sometimes good intentions may bear unpleasant results. It was, therefore, crucial to engage stakeholders in the sector on such a major decision.

Although government statistics indicate there was an increase in tourism revenues from $2.1 billion in 2016 to 2.3 billion in 2017, it is difficult to tell whether this margin of increment in earnings constitutes healthy growth for the sector. For example, is this the best that we could get out of the sector?

As some lawmakers suggested, there is a need for a comprehensive report on the impact of VAT on revenue based on factors such as research on sub-sectoral contribution to the sector. Knowing which areas of tourism hold the most potential could be used as a guideline on investing in the sector.

The current reliance on tourist arrival figures to gauge the success of the sector may not be enough. For instance, how long do these tourists stay in the country? How much do they spend (spending power)? Are they likely to return? Are they likely to be wooed by our competitors?

Lastly, the 2018/19 estimates tabled by Natural Resources and Tourism minister Hamisi Kigwangalla, showing a budgetary decrease of a whopping 22 per cent is worrying. If indeed the sector is growing, why would the ministry allocate such a meagre budget to it?