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!