TOURISM and Arts Minister Ronald Chitotela says government has agreed to suspend Value Addition Tax (VAT) for hotels for a period of at least two years in a bid to revive growth and boost the industry.
Speaking in Parliament during a debate on the 2021 budget, Chitotela said it was evident that the tourism sector was heavily hit by COVID-19, necessitating the suspension to boost the tourism sector.
“The tourism sector has been heavily hit and during the stakeholders meeting, we did submit 10 things that we wanted government to seriously consider, and out of the 10, seven were granted. In terms of the VAT on hotel packages on tourism packaging, the Minister of Finance (Dr Bwalya Ng’andu) did agree to a suspension and an agreement period to pay after two to three years. Maybe the dissemination of information to the public [was not done] so that the public could know that, yes, out of the 10 things that the operators of the tourism sector requested, seven were granted; we are agreed in terms of the suspension of taxes and the exploration of period in which the payment has to be paid for in terms of the charges on the tourism sector,” Chitotela said.
“That is the reason why we are inviting the new investment in the tourism sector so right now, as we speak, the rural parts of Zambia do not attract tax for anyone, who would set-up a hotel or a tourism business, because Zambia, even under the ZDA Act, do give exemptions if you want to set-up businesses in rural areas. So, in our quest to promote the Northern circuit, including the Western circuit, people who would want to invest in hotel construction materials that will be used for the construction of the packages, the tourism centres are tax-exempted based on the ZDA Act, which gives the preferential preference to invest in rural areas. The are major things that government has given to citizens that we need to utilise and take advantage.”
But debating earlier, Liuwa UPND member of parliament Dr Situmbeko Musokotwane called for the complete suspension of VAT to the hotel industries to help promote tourism.
“We have to go beyond what the Minister of Finance presented in the budget, in terms of stimulus packages. In the budget you were talking about reducing income tax for hotels and other companies as a way of stimulating demand. How does this reduction in income tax help the industry in the first place? I don’t see it happening. I would argue that the very first step that you should take is to remove VAT totally on the industries, on the hotels and hospitality industry. Take it out completely. When you do that, the cost of doing business is going to come down and then these hotels will be in a position to be competitive and attract the kind of visitors I indicated earlier: Saudi Arabia, Singapore, Australia and so on,” said Dr Musokotwane.
“So, reduce to zero the Value Added Tax (VAT) on the hotels in Livingstone and all these places. What I am proposing now is not something that is outside of the world. There is a precedent to this in 1995, 1996 when tourism, again, was badly hit around the Livingstone area, Value Added Tax was at zero. We saw how the hotels, like Sun International, those days and many others came to Livingstones, all of the sudden, they were competitive. So, the key point that I want to leave the Minister here is that Value Added Tax for hotels, put it at zero per cent.”
Meanwhile, the Financial Intelligence Centre Amendment Bill on Tuesday came up for reading at committee stage and is expected to appear on December 8 for consideration of the report.