Government rescinds 18% VAT on upcountry accommodation

The Uganda government has finally backtracked and agreed to rescind the 18% VAT on all upcountry accommodation.

During this year’s presentation of the Uganda National Budget for 2013/14, the Minister for Finance announced the introduction of an 18% levy on all upcountry accommodation and subsequently administered it starting 1st June. The levy was heavily resented across the tourism industry. This is because the nature of the tourism business involves prices with clients & foreign travel agents are agreed upon way in advance.

Then suddenly, without prior notice or consultation, a new tax is imposed on the accommodation that is already included in these prices! This simply puts the tour operators in trouble with clients & travel agents, as they have to change the already agreed upon prices otherwise they won’t afford to start off the tours and safaris. Several tour operators already incurred cancellations, while others are reported to have closed shop and made off with the remainder of their clients’ money simply because they could no longer afford to continue with the safaris and tours. Those that chose to absorb the tax have reported gross losses or made meager profit. If anything this tax was simply untimely and generally bad for the promising young tourism industry.

However, after several meetings with policy makers and the powers that be, the tourism fraternity has been able to convince at least the postponement of this tax. Though it should have come earlier, it is still great news that the government of Uganda has agreed to defer the tax for the next financial year. The Minister for Finance Hon. Maria Kiwanuka announced this proposal to the Finance Committee of Parliament which did agree to it and it is now left with parliament’s approval.

Our prayer however as tourism stake holders is for the government of Uganda to do away with whole idea indefinitely. Uganda’s tourism industry is upcoming and is growing at one of the fastest rates. One of its major challenges has been the high cost of visiting Uganda compared to her neighbors and biggest competitors. Introducing such a tax at this stage is simply a disincentive.

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