by Mark Gillies
Value Added?
This June a familiar shadow fell across Tanzania’s tourism industry. For the past few years, in the run up to the annual budget, the Tanzania Government has threatened to remove the VAT exemption that previously applied to many aspects of the tourism industry’s goods and services. And every year, following a good argument and representations from tourism players to the highest levels of government, the threat has fallen away.
Until this year. As reported by Hugh Morris in The Daily Telegraph on 7th July, on 23rd June, Tanzanian tourism operators were notified by the Ministry for Natural Resources and Tourism that the exemption would be removed from 1 July.
The reaction from tourism operators was immediate as representatives of the industry pushed behind the scenes and in public for the government to reassess its position, citing the potential harm the changes will cause to the Tanzanian tourism industry and the potential result of making the country and uncompetitive and unattractive destination for long haul tourists.
The East African on 18th June contained a statement from the 330-member Tanzania Association of Tour Operators (TATO) that said the country was already charging 7% more than other regional states due to multiple taxes and that imposing the proposed VAT would cripple the $2 billion worth industry. Going onto explain how tour operators in Tanzania are currently subjected to 32 different taxes, 12 being business registration and regulatory licence fees, 11 annual duties for tourist vehicles and nine other miscellaneous fees.
Despite on-going protests and negative international publicity, by mid-July, no government climb down was announced and Tanzanian tour operators engaged in a confusing intercourse with their international agents with neither sure who was charging what and whether to pass on additional costs to final client. Cancellations began to be reported and Prof. Maghembe, the embattled Minister for Natural Resources and Tourism moved to allay fears about a fall in visitor numbers by saying to reporters (The Citizen on 15th July), “Go and see for yourself the long lines of vehicles bringing tourists into Ngorongoro and Serengeti. It does not in any way point to a decline.”
As the story developed and opposition seemed to grow, sources began
to indicate that the government would consider a compromise and reports began to circulate of leading industry figures considering approaching President Magufuli to plead their case.
If these stories suggested a conclusion to the story (for another year), they were wrong. On 19th July, the Citizen reported how President Magufuli used an address to newly promoted police officers to scotch any rumours of compromise and reiterated that all charges due must be paid saying that it was better to have 500,000 tourists who paid the correct charges, rather than 1,000,000 who do not.
President Magufuli has made probity and clarity of procedure the mark of his nascent presidency and his comments are understandable in that context. However, it is also not difficult to understand the frustration of all Tanzanians working in the highly competitive African tourism industry. They know that the Okavango Delta or the Maasai Mara, to name but two, have as much draw as the Serengeti or the Ngorongoro Crater to many tourists who still regard Africa as a single country. The costs of going on safari are rising across the continent and so the end price of a package is assuming ever-increasing importance. The fear is that Kenya, which recently restored the VAT exemption on various tourism goods and services, will take a painfully large slice of tourist pie that had, until this year, been feeding so many Tanzanians.
A declining Tanzanian tourism industry will have three potentially serious consequences. The first consequence will be a significant drop in foreign currency earnings that will directly impact the national finances. The second will be loss of jobs as drivers’ services go unrequired and camps close. The third will be a setback for the cause of Tanzanian wildlife conservation – still, itself, reeling from the horrendous poaching epidemic of the last few years. In many parks and reserves it is only the presence of camps and the tourists they attract that protects these vital areas from poaching, habitat loss and unrestrained development. If camps don’t attract tourists then they become financially unviable and close, leaving the land vulnerable.
It is therefore understandable that many in the Tanzanian tourism and conservation sectors are despondent, but they are also frustrated, asking themselves why impose a new tax when so many existing ones go unpaid by so many?