Kenya silent on tourism as partner states offer sector cash, incentives
A sharp drop in tourist numbers as witnessed in one of the hotels at the coast. No firm has taken up the paid-up holiday given out by the government as an incentive to help revive tourism. Photo/FILE
What you need to know:
Kenya did not allocate any direct funds to the sector, drawing criticism from experts.
Rwanda has allocated $2.9 million for tourism development, Tanzania $8.87 million to the natural resources and tourism sector for development projects while Uganda’s tourism, wildlife and antiquities sector has received $4.6 million.
East African governments are seeking to boost the tourism sector with funds allocations, tax incentives, security measures and infrastructural plans that include expansion of airports.
Kenya’s budget is the only one that has not directly allocated any funds to tourism.
In the next financial year’s budget, Rwanda has allocated Rwf2 billion ($2.9 million) for tourism development, Tanzania Tsh14.198 billion ($8.87 million) to the natural resources and tourism sector for development projects while Uganda’s tourism, wildlife and antiquities sector has received Ush11.3 billion ($4.6 million).
Ush5 billion ($3.9 million) has been allocated to Uganda Tourism Board for promotion, training regulation and infrastructure development.
Kenya did not allocate any direct funds to the sector, drawing criticism from experts.
“The budget is almost silent on tourism, a sector that plays a role in the economic wellbeing of the country. In this year’s budget, there were no specific tax incentives or other forms of measures announced to specifically boost the sector. This even after the recent travel advisories as a result of terrorism attacks impacted negatively on the sector leading to loss of revenue and jobs,” reads a budget analysis by Deloitte East Africa.
Tourism generates 14 per cent of Kenya’s gross domestic product and employs 12 per cent of its workforce. Besides, it is the country’s largest earner of foreign exchange after tea and coffee exports.
Uganda has in its 2014/2015 budget reintroduced a value added tax (VAT) on the supply of hotel accommodation in tourist lodges and hotels outside Kampala.
Amos Wekesa, the managing director of Great Lakes Safaris, argues that with the East African Community launching a single tourist visa, the exemption was still necessary for Uganda, which invests the least in marketing its destinations and has been piggybacking on Kenya and Rwanda, which invest more.
Mr Wekesa argues that the exemption of taxes would enable tourist lodge and hotel operators to become competitive in a country that receives the least number of tourists.
Rwanda has exempted VAT on tourist guiding, game driving, water safaris, animal or bird watching, park fees, tourist charter services and ground transport.
Tourism is one of the leading foreign exchange earners for Rwanda along with coffee, tea and mining.
The tax exemptions will also go a long way to bridge the shortfalls especially in gorilla permits, whose prices were raised last year.
In Kenya, the government decision to allow corporate and business entities to pay vacation trip expenses for their staff on annual leave in the country and deduct such expenditures from their taxes may not work without a law in place, experts said.
“The concern is that there is no mention of whether the employee will be taxed on the benefit. Strictly, where an employer pays an expense on behalf of an employee, then it is the benefit of the employee, which should be taxed,” said Nikhil Hira, a tax partner at Deloitte East Africa.
On infrastructural developments that support tourism, Kenya has allocated Ksh1.65 billion ($18.9 million) to upgrade Kisumu and Isiolo and construct three new airports in Mandera, Malindi and Suneka.
The completion of Terminal 4 at the Jomo Kenyatta International Airport and the start of the construction of the greenfield terminal will ease the pressure on travellers and contribute to making Nairobi a regional hub, experts said.
Rwanda seeks to expand its Kigali International Airport, Kamembe and Rubavu and construct the Bugesera Airport, while Tanzania has set aside funds in the next financial year for upgrading of Bukoba, Shinyanga, Mwanza, Kigoma, Mpanda, Tabora, Mafia, Arusha, Mtwara and Kilimanjaro airports.
READ: Despite expansion, airports short in capacity According to Lazaro Nyalandu, Tanzania’s Minister for Natural Resources and Tourism, plans are under way to conduct feasibility studies for improvement of 11 other airports of Iringa, Musoma, Kilwa Masoko, Lake Manyara, Moshi, Lindi, Njombe, Songea, Singida, Bariadi and Tanga with assistance from the World Bank.
“From July, we are going to take dramatic measures to publicise Tanzania tourism abroad. The Tanzania Tourism Board in collaboration with Tanzania National Parks Authority as well as Ngorongoro Conservation Area Authority are going to team up to do this,” he added.
Income from Tanzania’s tourism sector increased from $1.37 billion in 2012 to $1.81 billion in 2013.
Of alarm to the airline industry will be the proposal to abolish the withholding tax exemption on aircraft leased from non-residents.
“Typically such contracts will provide for any such withholding tax cost to be for the account of the local lessee – in other words, the result will be significant additional costs for the local airline sector,” said David Tarimo, tax partner at PricewaterhouseCoopers.
By Scola Kamau, Dicta Asiimwe, Alex Ngarambe and Peter Nyanje
