More VAT shocks for Kenya’s tourism sector

VAT IMPLEMENTATION PILES YET MORE WORRIES ON TOURISM SECTOR

(Posted 04th September 2013)

Only a day after the shock news began to circulate that the Kenya Revenue Authority insisted with immediate effect to levy a 16 percent VAT on park and conservancy fees, has the tourism sector gotten yet more of the same as Serena Hotels published an announcement about the same happening to game drives offered in the parks as part of their air safari packages.

VAT Act 2013 – Introduction of VAT on game drives

Following the introduction of 16% VAT on game drives as per the VAT Act 2013 and the implementation of the same by the government as with effect from 2nd September 2013, we would like to inform our esteemed business suppliers that Serena Hotels will levy the 16% VAT on game drives – thus the air and ground packages prices as well as game drives prices ( non package arrangements) have been reviewed as with effect from 2nd September 2013.

We appreciate your understanding and thank you for your continued business support.

Other companies issued similar notices to their clients, resulting in a mini tsunami of invectives being thrown at the Kenyan government and the Kenya Revenue Authority over the fork tongued double standards now becoming clear.

You cannot tell us that our Vision 2030 has tourism as a main cornerstone and then do this. You cannot tell us that you want 5 million visitors and then do this. You cannot tell us in public speeches one thing and then do another like this. Earlier this week have coast hoteliers raised the alarm over their continued low occupancies. Word is out that Indian Ocean Beach Club may have to close down for lack of enough business. Our government tells us one thing and does another, just like previous governments did. This sector needs incentives for airlines to fly to Kenya. It needs an open sky policy in particular for Mombasa. It needs preferential funding with reduced interest rates to access loans to refurbish our resorts, upgrade and modernize them. What our sector does not need is to make it more expensive for visitors by 16 percent with that VAT nonsense. Tourism is an invisible export. Exports are under government policy free of VAT. They speak with forked tongues. The only outcome of this will be a life and death struggle for our sector. If that is how those two want to achieve their double digit economic growth, they are very sadly mistaken. If tourism’s bottom drops out again, their card house will come down on them’ wrote a regular contributor after literally screaming down the phone in an initial contact when discussing this latest setback for Kenya’s tourism industry.

We had as a sector made representations to government and to parliament about the impact of the budget proposals but it seems those people were deaf on both ears. We gave them facts and figures and our projections what impact VAT would have on the sector. While some apparently just ignored it, I think others may simply lack the capacity to understand such impact studies and the consequences. Overseas tour operators are already up in arms over the sudden increases in cost. It is not what we expected from this government. They have just removed the fuel tank from a locomotive for economic growth and if in a year they start crying it will be over milk they spilled themselves’ added another source closely associated with one of the sector’s leading trade associations.

The sad fact though remains that several key tourism products have now been subjected to VAT, raising the cost of such packages by 16 percent and only time will tell how this ultimately pans out, if the market is good and ready to accept and absorb such increases or if it will impact on demand and reduce visitor numbers even further. Watch this space.

%d bloggers like this: