Players in Uganda’s tourism sector say a number of Ugandans might be laid off from work because of the new 18 per cent value added tax that government has proposed to slap on upcountry tourist accommodations.
Finance Minister Maria Kiwanuka, in trying to source for funds to finance the Shs 14 trillion budget, targeted upcountry hotels as one of the areas to beef up government’s treasury for this year’s financial year.
At a recent press conference organised by the Uganda Tourism Association (UTA) at their offices in Kololo, players warned of negative repercussions if government went ahead with its tax plans.
“Tourism is a very price sensitive market and zero taxation will lead to higher consumer demand and increased investments,” said Babra Adoso Vanhelleputte, the owner of Ruhija lodge. She added that they would have “no option but to lay off some workers” if the taxes, as expected, push up the costs of doing business.
According to Gary Sagel, the group general manager of Wildplaces, the sector players will have to increase the selling price of their products by 18 per cent in order for business to make sense. The low occupancy rates and already high operation costs will force companies like his to cut down on the expenditure, which could lead to reducing the number of employees.
“The average occupancy ranges between 25 per cent and 30 per cent but the operational costs are constant whether the lodge is full or not. So, we may have to find means of cutting those costs which may include laying off some workers or not taking on more employees,” he said.
“Unemployment rates are very high but we will not be able to create as many jobs as we would have liked. Our budgets for training will also be reduced because we will not be able to afford,” he added.
According to the World Travel and Tourism Council (WTTC), tourism is one of Uganda’s leading foreign exchange earners and it employs more than 500,000 people (directly and indirectly), the majority being women and youths.
Tour operators say they have already booked for their clients, and cannot renegotiate the prices to reflect the new 18 per cent tax. The operators say they will make losses if the tax is implemented.
Sagel said some tourists book years in aance so, any slight change in rates could lead to the cancellation of a trip and an option for other cheaper destinations. A decline in tourist arrivals will also affect the number of tour guides, drivers and agents, among others, the operators warn.
The 18 per cent VAT on upcountry accommodation was first proposed in the 20132014 budget. Then, the operators opposed it and argued that the tax would lead to higher operational costs and that they had little room to adjust their prices. Such adjustments, they argued, would be a breach of contract.
The tourist players got their wish when government withdrew the tax. This time round, the players were not lucky. Tourist accommodation in Uganda remains one of the highest in the region. The price for a night in an upcountry lodge goes anywhere between $200 and $300. Room occupancy remains low, in many places less than 50 per cent.
Tourism contributed $834 million in 2012 and $979 million in 2013 to Uganda’s Gross Domestic Product. The Association Of Uganda Tour Operators (AUTO) has written to the president arguing that the new tax would force hotellodge owners out of business, reduce direct and indirect employment and that the marketing efforts by tour operators and hoteliers would be depleted.
AUTO brings together private sector tourism associations like operators, hotel owners, guides and travel agents, among others.
Source : The Observer