Expect less from tourism over VAT, lobby warns

By PHILIP MWAKIO

The effect of the new tax regime levied on consumers is likely to make Kenya an expensive holiday destination.  Tourism experts have warned of hard times ahead for the tourism industry as a result of the implementation of the VAT Act.

“This is definitely pushing Kenya into the league of expensive destinations. It will eat into earnings and reduce last years contribution to the Gross Domestic Product (GDP),’’ said Kenya Association of Hotelkeepers and Caterers (KAHC) Coast Branch Executive Officer, Mr Sam Ikwaye. Ikwaye warned government to start looking for the Sh90 billion generated by tourism last year elsewhere.

The VAT Act came into effect early this month. Since then, the taxman has been effecting the 16 per cent VAT on vatable goods and services, pushing up their prices.

Expensive destination

  “As tourism players, the new VAT should be reconsidered, otherwise, Kenya is now poised to be an expensive  destination owing to the increase in the cost of operating business,” Ikwaye said. “Increased cost of goods will definitely be passed on to the consumer and so will the high labour cost.’’

Speaking to The Standard, Ikwaye said the industry is already experiencing slowed uptake in domestic quotas due to the high cost of living — directly affecting the growth of domestic travel.

“People only plan for leisure when they have some disposable income,’’ Ikwaye observed.

Meanwhile, the 16 per cent VAT on park and reserve fees has been effected thus raising the cost of safari vacations at a time when the industry faces continued challenges.