Tanzania’s tax folly begins to hit


(Posted 07th July 2016)

European tourists enjoy consumer protection second to none when it comes to their rights and Tanzania is about to find out how they and their tour operators react to the folly of slapping VAT on tourism services. Tanzania’s Finance Minister has introduced the tax in his budget speech but the brunt of the dissent is now back firing at Prof. Maghembe, the Minister for Natural Resources and Tourism, for not just abandoning his sector but in a show of arrogance turning against the tourism industry when lecturing them from his high horse, claiming tourists will have nowhere else to go.
Well, that notion is now being put firmly to rest as several European tour operator and travel agency associations have challenged the Tanzanian government to either lift the VAT or else they will rebook their clients to other African destinations.
Sources from within Tanzania already count their losses as cancellations are pouring in thick and fast, from tourists who are not ready to pay several hundred dollars extra for a visit to Tanzania.
Sources close to the main tour operator association TATO in fact claim that their members have received way over a thousand cancellations have already been recorded and that the trend is accelerating for trips within the time frame European tourists have to cancel their trips in case of price increases.
Kenya suffered a similar trend two years ago when the Kenyan government would not listen and an equally hapless tourism minister there also failed to stand up in cabinet and fight for the sector, offering similar lame excuses. The downturn in Kenya at the time accelerated when into a time of downturn the prices for safaris and beach vacations went up, before over the past six months a series of expensive but absolutely necessary financial incentives had to be launched to revive the tourism industry.
Kenya’s tourism industry at the time was faced with the double whammy of anti travel advisories and tax increases, leading key European tour operators to divert safari business at the time to Tanzania at the expense of Kenya while Zanzibar became en vogue in Europe while Mombasa’s resorts remained empty.
Today has the boot shifted to another foot as Tanzania is now faced with a similar exodus and migration of business to neighbouring Kenya, Uganda, Rwanda and even as far as South Africa and Zimbabwe, where the cost of holidays is more affordable, in the case of South Africa aided by record low exchange rates of the Rand versus major currencies.
Experience over the years tells that once a destination is in the bad books with European tour operators, it is very difficult to make up lost ground and only at a very substantial expense, as is seen presently in Kenya.
As European tourists are protected against price increases for half a year, in some cases longer, would their travel agent or tour operator have to absorb the taxes, or else their Tanzanian safari operator, something impossible to achieve without bankrupting them.
It remains to be seen if TATO’s and HAT’s appeals to the Tanzanian President Magufuli will yield results, but if not, will dark clouds begin to fly over Tanzania’s tourism industry, safari and beach alike, until the lesson has been taught and has reached the heads of those responsible for this economic atrocity.