Uganda finally scraps VAT on key tourism services

UGANDA’S TOURISM STAKEHOLDERS ‘SATISFIED WITH VAT REMOVAL’

(Posted 02nd December 2013)

A letter from the Permanent Secretary to the Treasury made it official that the hugely controversial introduction of an 18 percent VAT charge on upcountry safari accommodation had been scrapped at last: ‘I wish to inform you that during the passing of the VAT Amendment Bill 2013/14, exemption on the supply of hotel accommodation in tourist lodges and hotels outside Kampala District was reinstated’. Tourism stakeholders expressed their satisfaction and applauded the efforts of their respective associations, which in conjunction with the Uganda Tourism Board made repeated representations to parliament and to government to have this tax measure rescinded, as it made accommodation packages of safaris across Uganda more expensive by 18 percent, and foreign tour companies were refusing to pay up as the tax was not included in any existing quotations for safari services. Initially in particular members of parliament showed total disregard and in the words of one key stakeholder almost contempt for their lobbying efforts, before a final push through the Ministry of Tourism, the Uganda Tourism Board and the parliamentary committee on tourism paved the way for a change of heart by parliament when they voted on the amendments proposed by government to the Finance Bill 2013/14 and the various VAT elements therein.

At the time, when the VAT was initially announced by the Minister of Finance in her budget speech, did the tourism industry predict a downturn in arrival numbers, and a series of cancellation of prebooked tours was in fact seen, not over any other issues such as destination appeal or service delivery quality by hotels and safari operators, but the raised cost of visits to Uganda.

Across the border in Kenya though stakeholders continue to struggle with a number of tourism products and services also subjected to VAT, in Kenya’s case 16 percent, and they will no doubt use the example of Uganda throwing the idea out of the window to lobby their own government once again to restore a level playing fields vis a vis pricing of tourism services and equally abolish the introduction of VAT on tourism services. Watch this space.