Zanzibar hoteliers cry foul over new levy , as govt sticks to its guns

Unguja. Hoteliers and tourism stakeholders in Zanzibar have said the introduction of the $5 levy for every hotel room occupied per night in the budget that was read on Thursday, June 15, is likely to affect the sector massively.

But the government has maintained that the levy will have no meaningful impact on the private sector.

In an interview with The Citizen, Zanzibar’s finance minister, Saada Mkuya Salum, said the new levies would be implemented immediately with effect from July 1.

"Hoteliers will have to see how to implement this, and I don’t think it is going to affect their businesses to that extent. What we are doing is creating a conducive business atmosphere; for example, regarding the issue of electricity, we have removed VAT on solar panels," Ms Mkuya said.

She added: “The $1 levy was in operation for eight years, and it was a blanket fee for everyone, but now we have categorized according to the stars”.

The planned implementation now leaves hotel stakeholder groups at the mercy of legislators in the House of Representatives, who start debating the budget today, Monday, June 19.

Speaking to The Citizen at different intervals, they said such measures only make Zanzibar an expensive and unpredictable place to do business.

They said having so many levies takes away the competitive edge that Zanzibar has against other island nations in the Indian Ocean.

"Hotels are already charging 15 percent as VAT now plus $5 dollars; this is definitely felt by consumers who might be forced to look elsewhere," said one hotelier in Stone Town who preferred anonymity.

She added: Though we are seeing a rebound in the sector with some handsome numbers of arrivals, we have to remember that this is an industry that was ravaged by the pandemic and some of the businesses are still in the recovery period.

The chairman of the Zanzibar Association for Tourism Investors (Zati), Rahim Bhaloo, said the new development has taken the industry stakeholders by surprise, adding that there was a need for prior engagement given the dynamics and nature of business.

"This is surely going to create concerns and challenges for service providers, knowing that the tourism season is about to start or, for some, has already started. We sincerely request the government to reconsider this, delay its implementation for now, and give stakeholders some time to be able to inform their agents about this raise, knowing that the rates for this season have already been negotiated and signed between agents and service providers," said Mr Bhaloo.

He added: Some holidaymakers have booked their hotels a year in advance; therefore, surprising them with additional costs overnight might either make them choose alternative destinations or the service provider will have to incur extra costs to maintain his reputation.

He further said the new measures require gradual integration and transition as hoteliers prepare their clients for the changes.

According to him, the government should enhance further tax collection from the value chain that the tourism sector creates instead of putting all pressure on a single source.

Spillover effect?

The Tanzania Association of Tour Operators' William Chambulo said that although the new changes that take effect on July 1 are in Zanzibar, they are likely to affect Tanzania Mainland because 40 percent of the visitors who come to Zanzibar also visit Mainland.

"This is the shoulder season, and the holiday packages are usually sold a year in advance, and the sale is closed, so there is just no way you can go back to the clients with new rates that require them to dig deep into their pockets," said Mr Chambulo.

He joins other commentators who have cautioned that the move makes Zanzibar and Tanzania, in general, unpredictable and unprofessional in the tourism industry around the world.

"Much as the introduction is necessary for revenue purposes, they should grant hoteliers a grace period before it becomes operational because at the end of the day we will have to pass it on to the visitors," he says.

In her budget speech on Thursday, June 15 in the House of Representatives, Ms Salum said the changes were inevitable because the existing $1 was not realistic in today’s atmosphere.