HARARE, August 4 (The Source) – Tourism and hospitality industry Minister Walter Mzembi says the government must reduce the 15 percent Value Added Tax (VAT) on foreign accommodation to five percent to grow the sector and boost state revenue.
“The introduction of the 15 percent VAT on foreign accommodation may not help grow the tourism cake and neither does it guarantee that government will get the desired increase in revenue,” he told The Source in an interview.
“Instead, there is merit in working to close possible leakages in the sector and considering other novel ways of taxation which may include taxing outbound tourists rather than taxing inbound arrivals who are coming to spend in the destination.”
Zimbabwe’s cash-strapped government early this year unilaterally imposed a 15 percent tax on foreign tourists’ accommodation to enhance its depleting coffers.
Since then, the country has collected a total of $1,65 million from the VAT on non-resident tourist accommodation in the four months to April this year, according to official data.
Despite concerns from various tourism stakeholders that the increased VAT will have negative implications on the tourism industry, the finance ministry’s secretary Willard Manungo recently told Parliament that the introduction of the tax was in line with regional trends.
“From a fiscal point of view, we continuously monitor the environment to try and ensure that we don’t undermine the recovery of the tourism sector,” he said, adding that the VAT was only introduced based on submissions from tourism stakeholders.
However, Mzembi believes the country can gain more by staggering the implementation of the VAT system over a three year period.
“I bring from the sector a suggestion to incrementally introduce VAT within a range of 5 to 15 percent aligned to our 2020 vision to give the industry an opportunity to recover and grow rather than to impose abruptly a full blown 15 percent tax that will certainly kill the goose,” he said.
Mzembi noted that tourism sector contracts business a year or two in advance and an abrupt announcement leaves operators in a tight fiscal space as they are forced to absorb the costs in order to avert booking cancellations.
Zimbabwe’s tourism industry is expected to grow by 5,1 percent this year.