...JPM endorses touchy VAT on tourism, transit cargo

AILY NEWS Reporter

19 July 2016

HEATED debate on the 18 per cent Value Added Tax (VAT) on tourism services and transit cargo was yesterday closed, with President John Magufuli strongly backing the new charges. The president said the government was determined to exhaust all available sources in its quest to increase revenues to fund development projects.

“It’s better to have 500,000 tourists who pay tax than host two million who do not,” Dr Magufuli said in Dar es Salaam after witnessing 58 senior police officers taking pledge of integrity for public leaders at State House.

The officers were recently promoted to Deputy Commissioners of Police (DCP) and Senior Assistant Commissioners of Police (SACP). Dr Magufuli blasted some players in the maritime industry who have been complaining on reduced numbers of ships docking at the Dar es Salaam port due to introduced VAT for transit cargo through Tanzania.

“In the past we had very many containers at the port which were not paying taxes but the situation has changed. We rather have few ships docking and paying requisite taxes,” he observed. Dr Magufuli dared importers fond of evading taxes to use other ports outside Tanzania if they were not willing to pay the taxes. Finance and Planning Minister Philip Mpango introduced the VAT on tourism services when presenting budget estimates for the financial year 2016/2017 in Dodoma last month. However, since then players in the industry have been complaining that the new duty would harm the booming industry.

The declaration by President Magufuli will now close the chapter and operators in the industry will be required to pay the duty. Just recently, the Minister for Agriculture, Livestock and Fisheries, Dr Charles Tizeba, maintained that the 18 per cent VAT on tourism services will not harm the growth of the sector as it was carefully researched before it was introduced.

Dr Tizeba explained that all key stakeholders in the sector were consulted before the new tax was introduced and were satisfied that it would not cripple the sector which is leading in foreign exchange earnings in Tanzania.

“The government is aware of the competitive environment among the East African Community member states and the country’s weaknesses and strengths in the sector... this matter should not be used to mislead people because it may send wrong signal to stakeholders,” he said.

Mr Tizeba further explained that Tanzania’s tourism was different from other countries like South Africa, Zimbabwe and Kenya, noting: “While Kenya is leading in number of tourists visiting the country, Tanzania earns from the sector more than Kenya.”

He observed that, before the Finance Act was endorsed by Members of Parliament, key players were involved in every aspect as budget preparations passed through various stages.