Govt reverses backdated tourism VAT

FINANCE and Economic Development Minister Patrick Chinamasa has waived the backdated Value Added Tax (VAT) accruing on food and beverages offered by the tourism industry as part of packaged accommodation between 2009 and 2015.

Zimra had launched a blitz on tourism operators who were accused of not paying 15 percent on both the withholding tax on commissions and VAT on food sold to foreigners as part of the accommodation package.

The VAT, which was backdated to 2009, has since been removed following representations by Tourism and Hospitality Industry Minister Dr Walter Mzembi and the tourism sector, to Minister Chinamasa.

Hoteliers, especially those operating in Victoria Falls, had been slapped with a combined $5,3 million bill in unpaid taxes by the Zimbabwe Revenue Authority (Zimra).

The Victoria Safari Lodge was handed a $1,26 million bill while the Victoria Falls Hotel was in arrears to the tune of $4,1 million.

Zimra argued that the taxes were supposed to have been paid between 2009 and 2015.

The Zimbabwe Council for Tourism (ZCT), together with its parent ministry, have been arguing that compelling hoteliers to pay the bills would cripple their operations, especially at a time when the destination is increasingly being shunned by tourists because of high costs.

Hoteliers claim they were not charging the VAT based in part on the “informal and non-binding advice from Zimra, which did not conform to the procedures stipulated in the Revenue Authority Act”.

But on July 18, 2017, Minister Chinamasa wrote to Dr Mzembi saying the “retrospective collection of the outstanding VAT obligations will undermine the viability and going concern of most tourism operators, since no VAT can reciprocally be collected from transient clients”.

“In view of the above and taking into account the important role that tourism plays in the growth and development of the economy, Treasury has approved the VAT zero-rating of food and beverages sold as part of packaged meals for the period February 2009 and December 2015,” said Minister Chinamasa.

Yesterday, ZCT president Mr Tich Hwingwiri told journalists that the tourism industry “welcomes the decision . . . to set aside efforts by Zimra to retrospectively collect VAT on food and beverages sold as part of packaged accommodation between 2009 and 2015.

“Since this decision was announced, ZCT has been working behind the scenes with relevant authorities to have this decision set aside, principally because it was prejudicial to the financial viability of operators across the country, who could not, of course, claim back VAT from the guests who had purchased these services.

“The amounts involved were substantial and were a significant threat to the viability of all operators,” said Mr Hwingwiri.

The waiver of the backdated VAT comes at a time when Government is continuing to give rebates to the tourism sector particularly to expenditure on capital items.

This has helped the sector to retool, modernise and refurbish their properties.

Several hotel groups such as Cresta, Rainbow Tourism Group and African Sun have already splashed huge sums of refreshing their businesses so as to appeal to a wider section of tourists.