Tanzania’s Magufuli Backs Plan to Increase Tax on Tourism, Wonders how it benefits Country when Visitors Don’t Pay Enough

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Tanzania president John Magufuli publicly backed a proposal by his finance ministry to introduce 18 per cent Value Added Tax (VAT) on tourism services and transit cargo, a thing which has upset industrial players.

During a budget presentation in June 2016, Tanzania Finance and Planning Minister Philip Mpango introduced the VAT on tourism services, structured to commence in financial year 2016/2017.

State owned Daily News reported earlier that tourism industry players have been complaining that the new duty would harm one of the country’s largest resource envelope contributor.

Speaking during a public function in State House Dar es Salaam, president Magufuli wondered what it would benefit the country to host mammoths of tourist who don’t pay tax

“It’s better to have 500,000 tourists who pay tax than host two million who do not,” he opined

Magufuli said his government was determined to exhaust all available sources in its quest to increase revenues to fund development projects.

The declaration now seals the industry players appeal for revision of the policy and operators will be required to comply with the policy, Daily news reported.

Tanzania Minister for Agriculture, Livestock and Fisheries, Dr Charles Tizeba, maintained recently that the 18 per cent VAT on tourism services will not harm the growth of the sector as it was carefully researched before it was introduced.

Tizeba explained that all key stakeholders in the sector were consulted before the new tax was introduced and were satisfied that it would not cripple the sector which is leading in foreign exchange earnings in Tanzania.

“The government is aware of the competitive environment among the East African Community member states and the country’s weaknesses and strengths in the sector… this matter should not be used to mislead people because it may send wrong signal to stakeholders,” he said.

Tizeba further explained that Tanzania’s tourism was different from other countries like South Africa, Zimbabwe and Kenya, noting: “While Kenya is leading in number of tourists visiting the country, Tanzania earns from the sector more than Kenya.”

He observed that, before the Finance Act was endorsed by Members of Parliament, key players were involved in every aspect as budget preparations passed through various stages.

Source: Daily News