Tanzania VAT changes to be scrapped

Tanzania

What happened?

Following extensive lobbying from Tanzanian tourism investors, the Government has finally agreed to withdraw its proposal in 2013/4 Finance Bill to impose VAT on Tourism Services. The services which were listed are:-

TOURIST GUIDING; GAME DRIVE; WATER SAFARIS; ANIMAL OR BIRD WATCHING; PARK ENTRY FEES; TOURIST CHARTER SERVICES & GROUND TRANSPORT.

So, what was it all about?

Proposals in the recent Tanzanian budget  included a serious ambush for the tourism sector by removing VAT exemptions on various tourist services, imposing excise tax on importation of aircraft etc. 

Although the tourism sector supported across the board removal of exemptions, against a reduction of tax rates in general, the big issue was, if passed, that the new law would become effective almost immediately. Most photographic tourism companies had confirmed, and in many cases invoiced, bookings extending out for many months to come. Indeed prices for 2014 were set some months back. 

But under European law a price increase of more than 2% on pre invoiced holidays is illegal. So operators were to be caught in the middle, as the proposed VAT changes per the budget, would, if passed onto the consumer, be anywhere from 10 to 18% increase on the invoice (excluding air travel) . If on the other hand operators were forced to absorb the increases, many companies would have been unable to pay their tax bills. 

The industry can now heave a  sigh of relief!