By PATRICK GITHINJI
An association of pubs and restaurants has petitioned the Government to reduce the 16 per cent VAT tax and two per cent catering levy charged to the industry players.
Sammy Ikwayo, Chief Executive of Pubs, Entertainment, Restaurants Association (PERAK) yesterday said the current taxation system has contributed significantly to non-compliance by players.
"We advocate the restructuring of the taxation system applicable to the hospitality industry to bring more players into the tax bracket," he said.
Ikwayo noted that VAT charged in Kenya is far above the rates of other world tourism destinations like Mauritius, Seychelles and South Africa.
"This makes it difficult for the local industry to compete in pricing with these countries."
"It is an irony that Mombassa, which has some of the best sandy beaches in the world doesn’t have an established hotel chain and commands one of the lowest bed rates in the world," he said.
"Its prime clientele is low-end group package tourists who have limited spending power," Ikwayo said.
The lobby group proposed that the current consolidated rate of 18 per cent — 16 per cent VAT and 2 per cent Catering Levy — to be reduced to at least 10 per cent.
Due to non-compliance, Ikwayo estimated that the Government losses up to Sh236 million in catering levy and another Sh1.3 billion in VAT annually on alcohol sales alone.
Ikwayo said the reduced rate would improve compliance in the sector and ensure the country ranks among the most favourable tourism destination in the region.
In its present form, Catering Levy is applicable on entities whose turnover exceeds Sh3 million per annum. The figure translates to a daily turnover of Sh8,219 or selling approximately 3.5 crates of beer.
