VAT on safari accommodation seen as setback for domestic tourism


(Posted 13th June 2014)

The latest budget announcements, adding an 18 percent VAT charge on all accommodation for safari lodges and safari camps in or near national parks, have sent shockwaves down the spines of the tourism sector, which now has to charge clients the extra amount of money for safari packages come 01st of July this year.

Two regular contributors and commenters were swift to voice their concern: ‘Going by the impact the VAT on tourism services had in Kenya since they launched these tax measures a year ago, this will be hard to digest. Let no one fool you, the down turn in Kenya’s tourism is not all about security. It is just as much for the reason of failed tax measures which made safaris and tourism services in Kenya more expensive at a time when the industry was already in decline. We in Uganda have been doing comparably better but the fact is that when Kenya is not doing well the entire region suffers as a result. If there are less people flying into Nairobi then less people will fly from there into the region. I have said it last year and say it again, the government is making no sense when on one side they say tourism is an invisible export and then hit it with VAT. Exports are not taxed like that, tea is not, coffee is not. Why then is tourism taxed when it is supposed to be an export? Something does not add up. Have they organized for VAT refunds for tourists like they to in South Africa and other countries? Like in Kenya, give it a year and they will wake up to reality’ said one in a phone conversation while the other added his own views: ‘The 18 percent VAT will be hard to bear for local tourists. Already there are too few Ugandan’s going to the parks and making the accommodation, which already is very costly for them, even more expensive now that VAT is added, will reduce the number of Ugandans who can afford such a trip. Unlike in Kenya where the discounts for locals are much bigger, here domestic tourism is still the domain for a few rich Ugandans. The lodges are too expensive for most Ugandans and there is too little option in the budget accommodation segment. The sector is far from stable yet and the old tax regime should have stayed for some more years to allow for a better foundation’.

The cost of fuel will also go up by 50 Uganda Shillings per litre as the excise duty for petrol and diesel has been raise while the cost of kerosene will go up by 200 Uganda Shillings per litre under the same budget line, affecting the overall cost of transport for safaris. Expect more reports in coming days when the full effect of the budgets across Eastern Africa will become clearer and the funds allocated to tourism marketing have been extracted from the various budget lines.

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