Zanzibar Tourism Investors Reject the Ministry of Finance's Infrastructure Tax Proposal

Investors in Zanzibar are highly concerned over recent proposals by the Ministry of Finance to introduce an 'infrastructure tax' that will have a significant impact on the tourism industry -affecting all hoteliers and tour operators, as well as all travellers from the airport and seaport, and all consumers of fuel and electricity, from 1 July 2015. See information below:

AMENDMENTS OF THE LAW AND INTRODUCTION OF NEW TAX (INFRASTRUCTURE TAX)

  • Guests staying in any hotel in Zanzibar – to pay $1 per person per day
  • Passenger embarking from seaport in Zanzibar to another seaport in Zanzibar – to pay 2,000/- per person
  • Passenger embarking from seaport in Zanzibar to another seaport in Tanzania – to pay 2,000/- per person 
  • Passengers embarking from airports to destination in United Republic of Tanzania – to pay 2,000/- per person
  • Petroleum products (diesel/petrol) – to pay 100/- per litre
  • Any purchases electricity supply – to pay 2% of supply net value

·         THE FIRST SCHEDULE OF THE PORT SERVICE CHARGE ACT NO 2 OF 1999 HAS BEEN AMENDED BY RAISING THE AIRPORT SAFETY FEE FOR PASSENGER TRAVELLING OUTSIDE THE UNITED REPUBLIC OF TANZANIA, FROM 8USD TO 9USD.

·         SECOND SCHEDULE OF THE SEA PORT SERVICE CHARGE ACT NO 2 OF 1999 WILL BE AMENDED BY RAISING  THE SEA TRANSPORT CHARGES FROM 5% OF THE TOTAL RECEIPTS TO 8% AND FOR CARGO THE CHARGE WILL BE 8% OF THE TOTAL RECEIPTS OR 800/= PER TON OF THE TOTAL TONNAGE CAPACITY FOR EVERY VOYAGE WHICHEVER IS GREATER.

TAX FOR ZANZIBAR DEVELOPMENT

Source: Passed Finance Bill 2015/16

Investors are being over burdened with the continuous introduction of excessive taxes, fees and levies, that are often introduced without consultation with stakeholders and regardless of Public Private Dialogue spirit, without prior warning, and without full consideration of the impact on all stakeholders - making Zanzibar increasingly difficult to do business in and increasingly expensive as a holiday destination. 

The Doing Business in Zanzibar 2010 report, by The World Bank and International Finance Corporation, positions Zanzibar at 155 out of 183 countries in terms of ease of doing business. Tanzania mainland is ranked 131, small island economies average at 91, while Sub-Sahara Africa averages at 139.

So it is of grave concern that the Government continues to introduce taxes in this manner – and also considering that the industry is still recovering from the impact of the economic downturn in Europe (which is its main source of tourists), Ebola scares and security breaches in other African countries last year.

The Government is making it increasingly difficult for investors to do business and is gradually pricing itself out of the destination market – which could result in a decline in investors and visitors, and reduced revenues.

The business community understands that taxes are vital to ensure the provision of essential services that help communities and businesses develop, but high tax rates and a complex business environment represents a major barrier to the ease of doing business and discourages investment.

We respectfully request that the President of Zanzibar - the Honorable Dr. Ali Mohamed Shein - does not introduce this infrastructure tax - and fully reviews the entire tourism tax regime - and ask for careful consideration as to the detrimental impact that excessive and unplanned taxes have on all stakeholders.