Tanzania Abandons Tourist Tax On Lodgings; Uganda Not Budging

Tanzania Abandons Tourist Tax On Lodgings; Uganda Not Budging

When it comes to budgeting for tourism marketing, not all African countries are equal.

The Uganda Tourism Board budgets $92,000 for marketing Uganda compared to Kenya, which invests $20 million, according to a report in AllAfrica.

Tanzania and Rwanda spend $23 million and $5 million respectively to market themselves as tourist destinations, the report says.

One way many countries add to their tourism revenue is by taxing hotel accommodations and lodgings.

When Uganda and Tanzania finalized their annual national budgets in June, both countries re-introduced value added tax on accommodations. Days later, Tanzania abandoned the VAT to stay competitive with its main regional rival, Kenya.

Tourism is one of the fastest-growing sectors in Uganda at an annual rate of 21 percent, according to the AllAfrica report. Tourism is one of Uganda’s leading foreign exchange earners and the industry employs more than 500,000 people directly and indirectly – mostly women and youth, per the World Travel and Tourism Council.

So far, Uganda is not budging on the issue of VAT on accommodations.

Such a tax will worsen already-low occupancy rates, said Moman Prabeen, managing director of Volcanoes Safaris and a member of the Association of Uganda Tour Operation.

“Occupancies (in lodgings) are still very low – between 20 percent and 30 percent,” Prabeen said. “The 18 percent(tax) is totally untenable and laughable for the country that wants to compete in the global economy.”

The tour association’s 130 member-companies say the tax, introduced with two weeks notice, will affect their already booked safaris.

“The new 18 percent VAT imposed on upcountry accommodation facilities will lead to losses by tour operators who have already sent out itineraries, and it is impossible to revise rates quoted. This may also lead to…cancellations after the increase is imposed on (tourists),” said association Chairman Bonifence Byamukama.

Profit margins, impacted by the high cost of doing business in Uganda, are too low to sustain the new VAT, said Corne Schalkwyk, head of marketing and sales at Marasa Africa. One of the largest private-sector employers in East Africa, Marasa Africa hires more than 10,000 people at its safari lodges.

The new tax could shut down businesses, Schalkwyk said. “We pay for our own tickets to go all over the world to market this country. And instead of receiving the good news that finally government is appreciating our efforts, we learn that even the little profit margin is going to be eaten into.”

The Uganda tax will make it harder to compete with destinations like South Africa, where tourists are refunded their VAT for accommodations upon presenting their receipts at the airport, said Amos Wekesa, a tour operator with Great Lakes Safaris and member of the Uganda Tourism Board.

He called for Uganda to increase its tourism marketing budget.

“If government wants to introduce VAT on accommodation, they have to first invest $3 million annually into improving the image of the country abroad for four consecutive years,” Wekesa said in the AllAfrica report.