Zanzibar News Blast
Zanzibar, a popular tourist destination known for its pristine beaches and rich cultural heritage, has recently implemented a new infrastructure tax aimed at generating revenue for development projects. The tax, which affects hotel accommodation, has sparked debates within the tourism and hospitality industry.
Zanzibar New Infrastructure Tax Fees
The Zanzibar government, through its Minister for Finance and Planning, Ms Saada Mkuya Salum, introduced the new infrastructure tax as part of the 2023-24 budgetary proposals. The primary aim of this tax is to generate revenue to fund infrastructure development projects in the region. The government asserts that the existing rates for hotel accommodation do not adequately account for inflation and fluctuations in exchange rates.
The tax rates vary depending on the hotel’s star rating.
– Visitors staying in Five-Star and Five-Star hotels are required to pay $5
– Those staying in three and two-star hotels must pay $4
– Guests at single-star or unclassified hotels, including AIrBnBs, will be charged $2 (equivalent to approximately Sh4,600)
While the government argues that the tax is necessary to reflect inflation and exchange rates, hoteliers are concerned about its potential impact on the industry’s competitiveness and visitor numbers.
Implementation of the Tax and Outcry from Hoteliers
The implementation of the new infrastructure tax has raised concerns within the tourism and hospitality industry. Hoteliers and umbrella bodies in Zanzibar have expressed apprehension about the potential ramifications of these charges on their businesses and the overall competitiveness of Zanzibar as a tourist destination.
One of the major concerns is the timing of the implementation. The industry is still recovering from the devastating impact of the COVID-19 pandemic, which severely affected tourism worldwide. While a 500% increase in tax may not necessarily be seen as negative, the sudden imposition of these charges could disrupt operations and hinder the industry’s recovery.
Furthermore, hoteliers argue that the multiple levies already in place, such as the existing 15% value-added tax (VAT), coupled with the new infrastructure tax, make Zanzibar an expensive destination for tourists. The fear is that these additional costs may deter visitors and force them to seek alternative, more affordable options.
Zanzibar Initiates Hotel Classification for Implementation of New Infrastructure Tax
Zanzibar has commenced the classification of hotels to facilitate the implementation of recently announced changes to the infrastructure tax in the current fiscal year. This classification process will categorize hotels, primarily in the tourism sector, based on their star ratings, thereby paving the way for the execution of the new tax changes, as stated by the state minister.
The amendments, which follow a review of the Zanzibar Finance Act No 9 of 2015 that established the infrastructure tax, introduce a flat rate of $5 for individuals staying in five and four-star hotels. Previously, a flat rate of $1 was charged for each person staying in any hotel. Under the new changes, a charge of $4 per person will apply to those staying in three and two-star hotels, and $2 per person for one-star hotels, as well as visitors staying in rented apartments.
Although the new rates came into effect on July 1, hoteliers raised complaints due to uncertainty about the classification of their establishments. Consequently, authorities decided to classify hotels before implementing the new infrastructure tax rates. The majority of the 706 hotels in Unguja and Pemba fall into the one to two-star category, with only a few being five, four, and three-star hotels. The Zanzibar Revenue Authority (ZRA) is collaborating with the Tourism Commission and experts to complete the classification and grading process, and a comprehensive list of hotels ranked according to their star ratings will be released as soon as possible.
The Chairperson of the Zanzibar National Chamber of Commerce (ZNCC) emphasized the importance of implementing the infrastructure tax changes in accordance with the law. The increased infrastructure tax is expected to bring significant benefits to the development of tourism in Zanzibar, as the additional revenue will enable the government to implement programs such as improving road infrastructure for tourists. The chairperson expressed gratitude to the government for considering their request to exempt tourists who have already booked and paid for this year from the new infrastructure tax charges, prior to the tax review.
ZRA advised hotels to utilize electronic payment systems and integrate with the authority’s system. They are also working on integrating the tax system with immigration, airports, seaports, and other relevant income sources to enhance fraud control measures.
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