The VAT changes in Tanzania has thrown the safari industry into a state of confusion by introducing a value-added tax (VAT) of 18% to many tourist services previously exempt from VAT. The changes became applicable as at 1 July 2016.
The impact of VAT changes in Tanzania
SafariBookings does not relish being the bearer of bad news. But the major problem is that tour operators were given only a few short weeks (by the Tanzanian government) to implement the changes. This small window of time has created a multitude of issues. For example, most camping and Kilimanjaro operators are not even VAT-registered because their services were previously VAT exempt. They are therefore unable to issue VAT receipts to their clients.
Tourists who have booked and paid for their safaris (usually done months in advance) are being asked by operators to pay extra.
Many tourist services (although not accommodation) were previously exempt from VAT, but this has now changed, and as a result, tours with accommodation are 5% to 10% more expensive and most camping and Kilimanjaro tours are 18% more expensive.
This change in VAT laws could potentially damage an industry which Tanzania relies heavily on for generating foreign exchange. Tourism is one of the main revenue sources for the country and a substantial part of the country's gross domestic product. Neighbouring Kenya offers substantially cheaper safaris and many great safari destinations. So there is a real fear of the long-term damage this could do to the industry in Tanzania.
The Tanzania Association of Tour Operators (TATO) has said that due to an assortment of taxes, the country already charges 7% more than other safari countries in the region. The new VAT would mean a 25% difference in Tanzanian safaris compared with safari countries that have exempted these tourist services from VAT.
What is VAT?
VAT is a form of taxation paid by the end consumer. Essentially, businesses collect VAT by adding it on top of their rates, but also pay VAT on products and services they purchase. If a business collects more VAT than it has paid, then it has to pay the difference to the government. And, if a business has paid more VAT than it has collected, it can reclaim the difference from the government.
Tour operators in Tanzania should be able to reclaim VAT from the government (if they pay more than they collect) but they have expressed serious doubts as to whether they will ever see a refund come their way. For example, Ngorongoro Conservation Area Authority has not been issuing VAT receipts, while the Tanzania National Parks Authority is issuing receipts, but they’re missing the VAT registration numbers, which allow operators to reclaim the VAT.
Our advice for tour operators
Our general advice to tour operators is the following:
Our advice to safari-goers
Our general advice to safari tourists is as follows:
The reaction from tour operators
The short notice the Tanzanian government gave to the safari industry shocked hundreds of tour operators. Thousands of clients were hit with unexpected charges. Furthermore, park authorities haven’t had enough time to implement these changes and provide proper VAT receipts.
The main issue is not the introduction of new VAT charges, but the short notice given by the Tanzanian government. If tour operators had received 6-12 months’ notice, the industry would have had sufficient time to adapt/increase their rates accordingly. This, in turn, would give clients the opportunity to understand the full cost of their safari before booking.
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