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Zimbabwean tourism sector hurt by new gov't tax: study

Xinhua, February 18, 2016 Adjust font size:

A new study published by Zimbabwe's association of tour operators shows that a 15 percent value added tax imposed on accommodation discourages foreign tourists.

According to the study of Zimbabwe Council for Tourism (ZCT) early this week, increasing the accommodation costs by more than five percent would see about 75 percent of tourists visiting Victoria Falls deciding either not to visit Zimbabwe again or reducing their length of stay from the average stay of 2-3 days.

Victoria Falls is Zimbabwe's prime tourist destination.

"Any measure that changes the tourist's stay would also deny the economy from enjoying this full tourist budget, which is widely enjoyed in different sections of the value chain," the study said.

The Zimbabwean government introduced a 15 percent Value Added Tax (VAT) in January 2015 to boost its depleting coffers.

A year after implementation, tourism players are complaining that the tax has eroded their profitability as most have decided to absorb the cost instead of passing it on to tourists.

An official at Bronte Hotel in the capital said their occupancy rate, which averaged 65 percent prior to the introduction of the tax, had declined by 20 percent.

Preliminary official figures indicate that Zimbabwe recorded a nine percent increase in tourist arrivals in 2015 to 2 million, largely driven by African visitors who pass through Zimbabwe.

"While tourist arrivals were maintained, the players are now worse off due to the need to meet the VAT costs from their own revenues," the council said.

"To ensure that the tourism sector also contributes to VAT like all other sectors, there is need to incrementally introduce VAT, starting with about 5 percent (acceptable to tourists) before gradually getting to the reduced rate within two years."

This would recognize their vulnerability to competition, while at the same time giving time to play a role in contribution to government revenue, it added.

Zimbabwe is targeting to increase tourism receipts from the current 827 million U.S. dollars to more than 3 billion dollars in the next three years before increasing to 5 billion dollars by 2020. Enditem