Tourism pushes for VAT review

The tourism sector is optimistic it has the ammunition to force government review the 15% value added tax (VAT) on foreign accommodation which the sector blames for making Zimbabwe uncompetitive as a tourism destination.


VAT on foreign accommodation was introduced in 2015 despite concerns by the sector that such a move would make the destination uncompetitive.

Zimbabwe Council for Tourism (ZCT) chief executive Paul Matamisa, said the industry had collected information from the region to lobby government to review the tax.

“This time around we have the tools; we did a research last year and produced a book which looks at VAT issues and prices within the region. We are seeing a situation where, when we engage again the ministry of Finance this time, we have got facts rather than emotive issues. Now we have information gathered by experts,” Matamisa said.

“What we expect government to understand is that you give away something, but you gain in another line. What we are simply saying here is take away the VAT but you will actually gain down the line when we do sales which surpass what we possibly got. Those sales down the line will bring more in terms of revenue.”

In a policy brief, the Zimbabwe Economic Policy Analysis and Research Unit (Zeparu) said studies had shown the adverse effect of VAT on the development of the tourism industry as well as on job creation opportunities in the sector.

Zeparu was commissioned by ZCT to assess the impact of VAT on the sector.

It said France’s reduction of VAT rate on restaurant services from 19,6% to 5,5% in July 2009 saw about 50 000 new jobs being created only in the restaurant sector by 2011 when other sectors cut over 30 000 jobs over the same period.

“In Germany, reducing the VAT rate on accommodation services from 19% to 7% from January 2010 saw an annual increase of 2,4% and 2,9% in the number of jobs in hotels in 2010 and 2011,” Zeparu said.

“In Luxembourg, the low level of VAT saw the hospitality industry creating 1 650 new jobs in 2011 and over 1 800 in 2012.

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