Challenges of taxation in the tourism industry: Tanzania perspectives

Abstract

This paper intends to serve as an early wake-up call for the need of reviewing and harmonizing taxes and levies imposed on the Tourism Industry in Tanzania. The research adopted qualitative method, involving 154 respondents who were drawn conveniently from over 1550 tourism stakeholders in the subsectors of accommodation, tour operations, tourism investors, travel operators, event organizers; tour guiding, arts and crafts, among others. Data were collected through focus group discussions (FGDs), Key Informant Interviews (KIIs) and field observations. The data gathered were processed and analysed qualitatively; the researcher first translated and categorized them into various themes and sub-themes basing on the research objectives and research questions in both FGDs and in-depth interviews guides. Data from the in-depth interviews were transcribed and analysed using thematic data analysis. Verbatim quotes were used to illustrate points of views during preparing this report. This study reveals that high tax rates coupled with multiplicity of these taxes within the government institutions hinder the development of sustainable conservation and tourism initiatives at the local and national level in Tanzania. Also, incoherent, lack of harmonisation of the taxes and multiplicity of taxes make Tanzania destination relatively expensive compared to other peer destinations in East and Southern Africa region. Over half of the tourism stakeholders, just pay taxes, levies and other charges ignorantly without awareness on the policies and laws associated to them. The tourism industry possesses stakeholders who largely not aware of the policy and legal aspects governing taxation. The lack of taxes compliance and tax avoidance in the tourism sector are attributed by multiple factors, which need to be mitigated. It was further observed that, despite the role played by various tourism associations and confederation in reforming the tourism business environment, a lot still needs to be done especially on the types of taxes and levies imposed on tourism industry in the country. This calls for a need of reviewing and harmonizing of all the taxes and levies imposed on the tourism services in the country for ensuring that Tanzania destination maintains its competitiveness.