KRA insists on VAT payment on conservancy and park fees

VAT ON PARK FEES MAKES TOUR PACKAGES EVEN MORE EXPENSIVE

(Posted 03rd September 2013)

Kenya’s tourism stakeholders are coming to terms with the insistence by the Kenya Revenue Authority to demand payment of 16 percent VAT on park and reserve fees, once again raising the cost of safari vacations at a time when the industry faces continued challenges. A mail received overnight from the Ol Pejeta Conservancy, an organization committed to wildlife conservation at a huge cost, speaks volumes about what struggle must have been going on behind the scenes to have KRA halt that move while lobbying parliament to scrap all new tax measures which could make visits to Kenya less competitive. Besides, as equally seen in Uganda, where upcountry accommodation in lodges lost the VAT exemption at the start of this financial year, contracts entered into with overseas tour operators ordinarily are longer term and bind a local safari operator to honour quoted rates, shielding tourists from sudden price increases against which consumer legislation in particular in Europe provide protection. Subsequently do the big league operators in Europe compel their local partners to sign relevant documents to the effect of keeping tariffs, once quoted, for the duration, leading in this particular case to sustained losses as the tax has to be absorbed and paid to prevent the wrath of the tax man. The mood among some regular contributors was distinctly turning ugly, as it did in Uganda too, blaming governments of not investing enough in tourism marketing and providing incentives to airlines to fly in particular to the Kenya coast while at the same time increasing the cost burden by introducing VAT payments for services long exempted. ‘When I hear government mouthpieces talk of improving competitiveness it sounds like a broken record. Where is the competitiveness in this tax measure. It increases the cost for tourists and even the option to claim back VAT on departure as many other countries do does not exist. And the worst, no prior consultations on the impact of such measures but just wait until the cry babies in government start to lament that there is a downturn and how come. A big disappointment for sure’ ranted one source after seeing the mail attachment received from Ol Pejeta.

Well time will tell just how great an impact this decision will have and who in the end will pay the bill. Watch this space!

VALUE ADDED TAX (VAT) ON ENTRY FEES
Dear Friend,

The Kenya Revenue Authority (KRA) has confirmed that 16% VAT on park fees will be effective from the 2nd September 2013.

Given the unexpectedly speedy implementation of the new Act as per the directions of the Cabinet Secretary, Ol Pejeta has had no choice but to levy VAT against all sales of Conservancy fees. We realize the implications for our conservation and tourism partners and visitors, but we must follow the law.

We are currently evaluating the implications for our 2014 rates and will come back in due course when we are ready.

If you have any questions regarding this announcement, please do not hesitate to contact us directly at info.

Regards,

Richard Vigne
Chief Executive Officer

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7 Comments

  1. Hi Fred, It is indeed a sad situation that the private sector have to continually educate the powers that be about the need to maintain a competitive edge for Kenya’s tourism industry… and that we have an obligation to overseas operators to respect the EU consumer laws on price increases. I feel for you all… sigh. Mia

    1. It is indeed a sad day for Kenya’s tourism. The continued lip service for the sector as evidenced by “Vision 2030 flagship status” on one hand and additional abrupt taxation on the other. And this in total disregard to very elaborate submissions made detailing the negative consequences of such action. Fred

  2. This type of “Nacht und Nebel” actions puts operators into an impossible position towards customers. Again and again we are confronted with decisions by governments and regulators that refuse to understand and accept that tourism is a global business. Customers can choose between 180 countries and that is exactly what they are doing. They might look at Kenya, Peru, Greece and Malaysia and if the get confronted by sudden price increases they just go somewhere else. Why would I want to try to sell a country that has no respect for my business ?

  3. Did the lawmakers who introduced this VAT take into account that within EU and other countries increment has to be 6 months in advance, otherwise the client is entitled to cancellation with full refund . did they take into account that safaris and hotel rooms are booked months in advance and there are conditions of cancellation? who will meet the added costs for already booked and confirmed services ? Tour operators Tour operators and agents had to meet the increment to avoid cancellation – all the hotels except ‘Lonrho’ now Fairmont refused to share the costs . Not yet again !!
    . is this creation of jobs we are heading to bankruptcy and less vistors this will be worse than 2008

  4. Did the lawmakers who introduced this VAT take into account that within EU and other countries increment has to be 6 months in advance, otherwise the client is entitled to cancellation with full refund . did they take into account that safaris and hotel rooms are booked months in advance and there are conditions of cancellation? who will meet the added costs for already booked and confirmed services ? we had the same scenario some years back when a 2% levy was introduced with immediate effect. Tour operators and agents had to meet the increment to avoid cancellation – all the HOTELS except ‘Lonrho’ now Fairmont refused to share the costs . Not yet again !!
    Is this creation of jobs or campaign to increase visitors to Kenya? Tour operators are heading to bankruptcy if this is implemented with limited choosing to come to Kenya
    this will be worse than 2008

  5. flying from Europe to Kenya pay usd 50 to get in, transferred using a fueled (taxed) vehicle to the hotel. check in in an hotel that pays tax plus emloyees pay taxes. Go on a 2 nights safari (park fee usd 130). Before departing pay dep. Tax usd 40. what else does this greedy Government want?
    Kenya is not the only holiday destination. competition is high plus security is wanting.

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