The Zimbabwe Council for Tourism (ZCT) has warned that if the current value added tax (VAT) on foreign accommodation was not reviewed, tourist arrivals would decline by 75%, costing the economy up to $124 million per annum.
The Zimbabwean government last year imposed a 15% VAT on the accommodation for foreign tourists as a way of raising money to fund the country’s expenditures.
However, instead of raising revenue for the government, the VAT increase has led to the decline in the number of tourists coming to the country, while affecting the industry’s profit.
According to Paul Matamisa, ZCT’s chief executive, the VAT charge has caused a drop in the number of foreign tourists, and at the same time, affected the profitability of the sector, as some of the players in the industry opted to absorb the charge themselves so as to remain competitive.
Matamisa further stated that the current VAT charge was very high and should be reduced to the original 5% to make sure that the Zimbabwe tourism industry does not experience a drop in the arrivals, and at the same time, businesses operating in the industry gain profits.
Government has since responded to the calls for the reduction of VAT by offering a sliding scale solution. In the proposal, the government suggests that the industry charges a VAT of between 0% and 15%, depending on the currency used to pay for the accommodation, with the most preferable one being the South African Rand.
However, some of the players in the industry are still concerned with the proposal, especially with the SA Rand being given preference. According to Matamisa, most of the foreign tourists visiting the country are from Europe and the USA, and thus offering incentives to the South African market will be a tricky situation.
Matamisa is therefore suggesting an all-inclusive approach to coming up with the VAT to be charged so as to ensure that the main markets for Zimbabwe tourism industry are not left out.