Zimbabwe could have lost close to $124 million in tourism revenue last year to the controversial and punitive value added tax (Vat) imposed by the country’s cash-strapped government.
A latest report commissioned by the Zimbabwe Council for Tourism (ZCT) revealed that the country could have received a paltry $6,6 million in tourism taxes for the whole of last year instead of gaining hundreds of million dollars in tourists expenditure.
“The decision to extend Vat to accommodation services was mainly motivated by the need to increase revenue for government. There does not appear to have been due regard to the impact that the measure was going to have in the value chain industry, as the short-term objective of increased revenue can easily be countered by the decreased tax collections from other activities depended on the tourism industry,” the tourism body said.
This was after Zimbabwe received a total of 87 138 tourists from Europe and America, who constitute the tourists interviewed in Victoria Falls, in the first half of 2015.
Given that on average, a tourist budgets about $1 900 to spend in Zimbabwe, this means that about $165,6 million was enjoyed from these arrivals.
However, the government collected about $1,65 million Vat from accommodation and if this trend was maintained, about $3,3 million could have been collected during the first half.
“If the hotels were to pass on the entire costs to the tourist, the economy would lose about $124 million of the tourist expenditure, assuming that 75 percent of the tourists decide not to visit Zimbabwe as per the findings from the interview,” ZCT said in the study.
The report, which was conducted by the Zimbabwe Economic Policy Analysis and Research Unit on behalf of the ZCT, noted that revenue targeted by the government from Vat was a pittance compared to the lost tourist expenditure.
“However, given the continued shrinking of the tax base, it is also inevitable that the tourism industry should also continue to contribute towards tax revenue through other means as is happening to other sectors such as telecommunications, fuel retail, tobacco and others where taxes were introduced to get revenue,” ZCT said.
“Thus, the Vat cannot be entirely removed, as in general there is some level of tax which is tolerated by the tourists. If the accommodation costs were to
increase by five percent, there will not be much impact in the industry, and once the tourist is used to the increase, a further five percent can be added on in subsequent years,” the report added.
This comes as Tourism minister Walter Mzembi is having a tough time convincing government to scrap a 15 percent tax on accommodation for foreign visitors, which he says makes the country a more expensive and less competitive tourism destination.
The country’s political situation characterised by spontaneous protests has worsened the problem and is mainly responsible for Zimbabwe’s poor ranking in the 2015 World Economic Forum Travel and Tourism Competitive Report.
The travel and tourism report ranked Zimbabwe in May among the worst tourism destinations in the world at number 115 out of 141 countries.
Furthermore, an impractical pricing system with high hotel and transport rates is also a setback to Zimbabwe’s tourism at a time the sector battles to deal with other challenges such as heavy police presence on the highways and rampant corruption. Daily News
