High Taxes And Levies May Slow Down The Tourism Sector Recovery

Tourism and hospitality stakeholders have urged the government to scale down taxes and levies in the tourism industry so as to attract more domestic visitors and recreate jobs for the youth. They argue that the industry risks extreme revenue drop unless taxes and levies at the national and county levels are harmonized.

Industry players say that levies introduced by counties coupled with already existing statutory taxes are pushing up the cost of tourism products.

“The government needs to reduce too much burden on the hospitality and tourism sector. Kenya risks losing business if prices offered are way above our neighboring competitors for instance Tanzania, Rwanda, South Africa, and other countries,” said Hasnain Noorani, Kenya Coast Working Group Chair and Managing Director for PrideInn hotels.

Currently, tourism establishments are paying the statutory 14 percent Value Added Tax and an extra two percent tourism levy to Tourism Fund. They also pay for business permits, National Environment Management Authority permits, liquor licenses at the county level, health, and advertising among other permits.

“Despite many levies being long-standing in nature, there has been a general increase in the number and scope of tourism-related taxes, fees, and charges over the last couple of years. The higher taxes make Kenya as a destination too expensive,” said Victor Shitakha, Chairman of the Kenya Coast Tourist Association (KTCA).

Stakeholders want the government to scale down taxes in the tourism and hospitality industry so as to attract more domestic merrymakers and recreate lost jobs for the youth especially at a time like this when the economy is negatively impacted by the Covid-19 pandemic.

“We don’t have a problem with paying levies since we have to support the government in its endeavors to deliver service. However, some licenses and fees imposed on the industry are a bit punitive. We would appreciate if some of these licenses were traded off for levies,” said Mr. Noorani.

The industry is currently experiencing the burden of paying taxes during this Corona period when business proprietors are required to remit their dues, renew licenses and others do renovation after lockdown.

“With hotels and other tourism establishments reopening, some hoteliers may find it hard to remain afloat. They are struggling to pay the levies and still sustain the workforce and pay suppliers and other bills. We urge the government to consider the removal of some of the levies,” said Mr. Shitakha.

Given the global economic slowdown resulting from the coronavirus pandemic, this year the tourism sector stands to lose.

“Right now, the industry is heavily dependent on domestic tourism. Affordability should be at the highest priority, but with the high taxes and licenses, this becomes a major challenge,” added Mr. Shitakha

Counties such as Mombasa, Kilifi, Nakuru introduced a bed levy for every occupied hotel room. In its 2015/2016 Finance Bill, Mombasa introduced a monthly room levy of between Sh120 and Sh180 per room, depending on the hotel’s size and rating.