06 Jul 2014

Tourism Experts Caution of Job Cuts

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Experts in the tourism industry of Uganda say several Ugandans could lose their jobs due to the newly introduced 18% Value Added Tax which the government has planned to put on all tourist accommodations found upcountry.

NO-VATMaria Kiwanuka the Finance Minister, in trying to look for funds to fund the 14 trillion Uganda Shillings budget, and these upcountry accommodation facilities are among the sectors target at to support the treasury of the government for this financial year.

During the not long ago concluded press conference which was organized by the Uganda Tourism Association – UTA at their head offices found in Kololo, experts cautioned of negative consequences in case government went on with its tax ideas.

Babra Adoso Vanhelleputte who owns Ruhija lodge said that Tourism is an extremely price sensitive industry and zero taxation will bring about greater consumer demand as well as higher investments. She went on to explain they wouldn’t have any other option but to fire some of their workers in case the taxes, as anticipated, increase the costs of conducting business.

In accordance with the team general manager of Wildplaces – Gary Sagel, the industry participants will be compelled to raise the price tag of their services by 18% to ensure that business makes sense. The lower occupancy rates for tourists during their safari in Uganda plus the already high costs of operation will compel companies such as his to minimize on the general expenditure that could result in lowering the employees’ number.

He added that the ordinary occupancy ranges from 25% to 30% however the operational costs remain constant regardless of if the lodge is fully occupied or not. Therefore, they will have to device means of reducing those costs that could include firing some employees or not accepting any more employees.

In addition he explained that Unemployment rates are extremely high yet they won’t be in position to generate as many jobs as they would have wished to. Their budgets for staff training will as well be cut down because they won’t be in position to afford to pay for it.

In accordance with the World Travel and Tourism Council – WTTC, tourism is among the topmost foreign currency earners of Uganda and the industry offers employment to over 500,000 people either directly or indirectly, with the majority of them being the youth plus women.

Tour operators claim that they have already made reservations for their clients, and can’t renegotiate the rates to show this new 18% tax. In addition they say that they are going to make very big losses in case the tax is put in place.

Sagel went on to say that a number of tourists make reservations years earlier; therefore, any simple change in the prices could result into the cancellation of their trip and an alternative for other affordable tourist destinations.

The operators further warn that A reduction in tourist arrivals in addition will affect the quantity of tour agents, guides plus drivers.

The 18% VAT on the upcountry accommodation facilities was initially suggested in the 2013-2014 budget. After that, the operators greatly opposed it and asserted that this tax would result in higher costs of operational and that they had less time to change their prices. This kind of adjustments, they said, would be a violation of contract.

In 2012 the Tourism industry contributed $834 million while in 2013 it contributed $979 million to the Gross Domestic Product of Uganda. AUTO – the Association of Uganda Tour Operators has written to the Ugandan president stating that this new tax will push owners of hotels and lodges out of business, this direct and indirect lowering employment and also the marketing endeavors of tour operators plus hoteliers will be exhausted.

AUTO combines private sector tourism organizations such as operators, guides, hotel owners as well as travel agents, plus other.