Tanzania tax increases hit tourists hard

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Tanzania has recently introduced an 18% Value-added tax (VAT) on tourism services , including ground transportation, tour guides, parks fees and camping fees. Hotel fees are not affected, as these are already subject to VAT.

Tour operators and other tourism stakeholders have appealed the government to repeal the tax, so far to deaf ears. Both Kenya and Zimbabwe issued new taxes on tourism recently, only to scrap them after realizing how badly these affects tourism. Thanks to internet, tourists today are more price-sensitive than ever, and will easily change their destination in favour of a cheaper option. Kenya’s recovering tourism will certainly benefit of new taxes in their southern neighbor.

News are already that many tourists have cancelled their Tanzania trips, opting to go elsewhere. Other tourists, who have already paid their trip, have been dismayed by extra bills issued by tour operators due to the new tax. Unfortunately, some tour operators are taking advantage of the situation, asking extra payment of higher amount than the VAT increase the price would do.

This way visitors will feel unhappy even before their trip started! Customer satisfaction is the best possible advertising, but Tanzanian tourism authorities seem to think otherwise. The country has a huge tourism potential, but is lagging behind in number of tourists. The government does not even want more. The claim by Tanzania President John Magufuli that “it is better to have 500,000 tourists who paid taxes than a million who did not” is simply idiotic, proving he does not understand about the economics of tourism industry.

Paradoxically, the cost of camping budget safaris will increase the most, up to full 18%. The cost of Kilimanjaro climbs will also increase significantly, by hundreds of dollars.

I don’t oppose tourist services taxation, but these should be kept reasonable. Tourism services are subject to VAT in many other countries as well. The problem with Tanzania is that visiting there is already expensive for variety of reasons, mostly due to existing government-induced taxes and fees. Park fees in Tanzania are already very high, by any international standard, and after VAT will get even higher. Visa costs are also high, while flying is heavily taxed and therefore expensive.

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