Safari operators protest VAT on accommodation


(Posted 06th July 2013)

The introduction of 18 percent VAT on hotel and lodge accommodation will have devastating consequences on leisure tourism to Uganda’ said a regular tourism source in Kampala yesterday, when discussing the immediate impact of the restoration of VAT for hotel accommodation. Tour and safari operators are bound by contract to maintain quoted rates for safaris for up to 18 months ahead, and are now stuck with the added cost, which if to be absorbed will render the safari businesses not just profitless but turn it into a loss maker.

Ministry of Finance sources on condition of not being named denied any impact of the VAT decision, showing their blatant ignorance about the inner workings of a sector, which has for years, despite of government neglect, grown, albeit at a pace fare slower than it could have, compared to for instance neighbouring Rwanda, where tourism has been understood and embraced at the highest level of government and is being facilitated to create prosperity.

Leading stakeholders have in recent days gone on rare record in the media over these actions, accusing government of not just mere lipservice towards the sector but of creating a work environment radically opposed to the often talked about ‘enabling environment’, a phrase often used to self glorify economic advances even if glaringly absent.

What they have done is create a disabling environment for the tourism industry. The tourist board which is supposed to promote the country, got a paltry 250 million Uganda Shillings. What the hell are they thinking that can do other than pay rent and utilities and maybe staff’ ranted another regular source, for obvious reasons wishing to remain anonymous.

This will lead to job losses in the sector and will only make an already tough situation more difficult. Others of our neighbours treat tourism as a priority sector and here it is almost as if we are punished. Maybe they want to reduce tourism so that oil exploration can go ahead without us raising issues like in Murchisons, where they want to pump oil in a wildlife park. We are completely at a loss to understand how a sector with the biggest potential for immediate job creation, FDI and forex earnings can be treated so badly. This is unacceptable, completely unacceptable’ said yet a third source met on Friday, all expressing their utter frustration with the turn of events.

Accommodation portions of safari packages have since 01st of July increased by 18 percent and only a few booked safari groups have accepted this fait accompli while most reportedly resisted strongly. Other safari groups reportedly already cancelled their booked trips outright, unless the increase is revisited.

Safari operators in turn say they have no legal option but to accept the added cost, which hotels say they most reluctantly added to their bills but for fear of being raided by the Uganda Revenue Authority and made an example of should they fail to charge and remit the new tax burden.

Leading stakeholder representatives have also met with the committee on tourism in parliament to express their concerns and fears that the sector may be destroyed by action of ignorant government officials, who have for long displayed an attitude towards tourism as either ‘just happening’ or otherwise unimportant, generally perceived as an insult to an industry which last year earned the country over 800 million US Dollars.

One leading lodge operator in the country claimed, also on condition of anonymity, that their occupancies will suffer as a result of the tariff increases. It could not be immediately ascertained how the new VAT addition will affect conference participants now heading to Uganda for the Routes Africa meeting and other conferences, as their accommodation cost too is bound to increase by 18 percent. Watch this space.