Tour operators’ frustrations against Treasury delays to effect duty

27Nov 2018
The Guardian Reporter
The Guardian
Tour operators’ frustrations against Treasury delays to effect duty

TOUR operators are increasingly becoming impatient against Treasury’s delays in effecting an import duty waiver on special vehicles used as capital goods as the tourism peak season approaches.

Special purpose tourism vehicles like these for sightseeing are expensive to import necessitating import duty waiver by Treasury.

Tanzania Association of Tour Operators (TATO) CEO, Sirili Akko recently wrote a letter to Minister of Finance and Economic Planning, Dr Philip Mpango informing his that tour operators were complaining against payment of the import duties which some of their vehicles were stuck at ports of entry as the deadlock remains intact.

“It is from this backdrop that TATO decided to write to you, seeking clarification on this particular issue. Does it mean that the exemption hasn’t been effected?” Akko said in his letter as TATO members fume over Treasury’s lack of precision.

TATO Chairman, Wilbard Chambulo also expressed frustration by the delays saying the association’s over 300 members across the country, are caught in a catch-22 after having discarded a number of old vehicles.

“They were expecting to import the duty free ones ready for transporting tourists in the forthcoming high season due to start in mid December this year,” Chambuso said noting that Treasury’s silence has only made things worse.

“We just want a word from the government whether the offer was either false or real,” Chambulo charged displaying the frustration which many TATO members have.

Chambuso further noted that TATO believes that the well-thought objective to waive import duty on special tourists’ use vehicles, was born out of interest of the Fifth Phase Government to stimulate development of the tourism industry, a key sector of the country’s economy.

During the 2018/19-budget session, Parliament amended the fifth schedule of the East African Community Customs Management Act, 2004, in order to provide import duty exemption on various types of motor vehicles for transportation of tourists in the region.

Most TATO members had high expectations that from July 1, 2018, the waiver would have started operating. Under the new law, special tourism ferrying vehicles including those for sightseeing, buses and overland trucks were supposed to be zero rated.

Tourism is a key sector of economy, as it is the country’s largest foreign exchange earner, raking in over $2 billion annually, equivalent to 17 percent of the national gross domestic product according to official data.

But nearly six months now, the exemption has turned to be an empty promise, as the government is still dragging its feet, prompting TATO leaders to seek clarification.

Proposing the import duty exemption on various tourists’ vehicles in the 2018/19 budget in Parliament, Dr Mpango said the move was critical for stimulating development of the multi-billion dollar tourism industry.

“I propose to amend the fifth schedule of the East African Community Customs Management Act, 2004, to provide import duty exemption on various types of motor vehicles for transportation of tourists,” Dr Mpango said in his budget speech tabled before the National Assembly in the country’s capital – Dodoma.

He said the objective of the measure was to promote investments in the tourism sector, improve services, create employment and increase government revenues.

But the TATO chief said, its members who had received the waiver with excitement because they would have saved U$9,727 for each imported tourists’ vehicle, are now at odds and stranded.

“Imagine before this relief, some tour operators used to import up to 100 new vehicles at a go and paid $972,700 as import duty alone. Now this money will be invested expanding a company in a bid to create more jobs and revenues,” Chambulo argued.

Available records indicate that tour operators in Tanzania are subjected to 37 different taxes, including business registration, entry fees, fees for regulatory licenses, income taxes, and annual duties for each tourist vehicle.

The TATO boss argued that the contentious issue is not only how to pay the myriad of taxes and make profits, but also the modality and time spent in complying with intricate taxes.

“Tour operators need streamlined taxes to ease compliance because the cost of compliance is so high and as such, it inhibits voluntary compliance” he noted.

A joint report by Tanzania Confederation of Tourism (TCT) and BEST-Dialogue, shows that an average annual cost for a personnel to accomplish the regulatory paperwork per each local tour operator stands at 2.9m/- per year.

Tanzania is estimated to be home to over 1,000 tour companies, but official data shows that there are as few as 330 formal firms complying with regulatory requirements most likely due to complexities in become a formal entity.

This means that there could be 670 briefcase tour firms operating in the country at present which translates into an over 2.5bn/- revenue loss by Treasury if each company paid U$2,000 as license fees.

However, the Finance Minister also promised through his budget speech that the government was to introduce a single payment system that would enable businessmen to pay all taxes under one roof in a bid to offer them a hassle-free tax compliance process.