THE tourism industry, reeling from numerous debts and high costs of operations against a very low-income base, is now seeking a two-year tax moratorium to save it from drowning in numerous high-tax obligations which are threatening its sustainability.
The industry has been battered by the Covid-19 pandemic and has to date retrenched up to 70% of its employees as it continues to tank. This is, however, coming as the government has projected the tourism gross domestic product (GDP) for 2025 to be around US$4,4 billion.
In 2018, tourism players have pleaded with the Treasury to review the 15% value-added tax (VAT) on foreign accommodation, the 2% transactional tax and duty exemption for car rental owners in order to make the country a cheaper destination.
The industry is battling licence fees, payable to the Zimbabwe Tourism Authority (ZTA), operators licences, VAT (as an input cost), local authorities costs — rates, refuse, water bills, licence fees and other levies .
Hospitality Association of Zimbabwe Matabeleland North chairperson Anald Musonza this week told the Zimbabwe Independent that it would be helpful to zero rate all taxes for the industry for 2021 into 2022 as the industry is bleeding with no decent income.
“The hospitality and tourism industry is a net exporter and its survival is important for the economy, not our country. This will help the business survive,” Musonza said.
“Taxes have the effect of making the tourism and hospitality expensive and uncompetitive. We have all the licence fees that are still due and payable, yet businesses have no income. There should be a moratorium for the next two years to allow businesses to survive or subsidised token rates charged.
“This goes for all operators’ licences, ZTA levy, including all local authorities licencing fees that are huge costs for businesses that have no income. If we have to also have low rates that are affordable for the local market, we need lower costs of doing business.”
Musonza said although arrivals in the resort city of Victoria Falls had started to pick up in May and June, the latest lockdown had seen a decline in arrivals.
This has been worsened by the fact that domestic tourism, which makes about 80-90% of the business, had also been affected by the closure of inter-city travel as well as internationals who had started trickling in.
“Local authorities charges for rates, water, sewer and licensing fees are astronomical and beyond the reach of both businesses and residents. This has affected most businesses’ ability to do business in 2020 all the way into 2021. If this is not addressed most businesses will buckle under unsustainable debts,” he said.
As the obligations take a toll, exacerbated by the pandemic impacts, Musonza said the small and medium Enterprises (SMEs) which are part of the main stream industry have been affected the most.
Any business that was heavily borrowed pre-Covid-19, he said, would be bleeding as no decent revenues have been earned in the last 15 months to help service debts from loans or recurring costs like staff salaries.
“Lodges, tour operators have almost collapsed. Employees have lost jobs and over 60-70% have been retrenched. Our economy is Victoria Falls, is 90% tourism and with the collapse of the industry, it has affected other downstream support industries as well,” he said. “We have lost huge critical skills in this industry that I don’t think we will get back. The Covid-19 pandemic will leave hospitality and tourism Industry bruised and it will take years to rebuild the products back to prior 2019 levels.”