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| Business |
| Tourism industry says cut too little |
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by
Alexander Newa, 08 July 2003
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18:45:58
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The local tourism industry has said the new cut on the service tax on hotels, motels and inns by government from 10 percent to five percent is too little for it to make any meaningful reductions in prices and rates.
Finance Minister Friday Jumbe on Friday presented the 2003/04 budget which contained the cut, among other fiscal measures.
But Malawi Tourism Association (MTA) chairman Harry Mtuwa said in an interview on Tuesday while the industry can “put on a little smile”, hospitality industry operators expected the cut to be bigger.
He said at the moment, the industry is already slapped with a heavy tax of about 30 percent and taking off five percent is just a drop in the ocean.
Mtuwa said the local hotel industry pays 10 percent service charge, 10 percent government tax and an additional 10 percent surtax.
“Now that they have removed five percent on service tax, we will be paying 25 percent in taxes,” said Mtuwa. “Of course, we have been telling government that the taxes are already high.”
He said although the hospitality industry is likely to reduce their rates and prices of goods and services, the consumer will not get the full benefit of it because the reduction is meagre.
“The industry is managed by professionals who will make sure that the benefits are passed on to the consumer but the taxes are just too much, making it difficult for the destination to sell,” said Mtuwa.
He said in other countries, service providers pay between 2-5 percent in taxes and are able to offer cheaper rates which make them attractive.
He explained that because of the high taxes, a hotel service that Malawi can charge US$150, other countries can charge the same service between US$60-US$80 yet they have better products.
“Malawi is perceived as an expensive holiday destination. And it’s the high rates that make it unaffordable,” the MTA chair said, calling on government to remove further the remaining taxes.
According to Jumbe’s budget, the reduction in the service tax is expected to benefit consumers. He said in his statement he expected industry to pass on the cut to their customers.
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