Hotels, restaurants, venues, transport, and food industries could suffer from a possible VAT increase. Picture: Patrick King.
Hotels, restaurants, venues, transport, and food industries could suffer from a possible VAT increase. Picture: Patrick King.

VAT increase a scare for tourism

By Staff Reporter Time of article published Feb 26, 2020

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CEO of Cape Town Tourism Enver Duminy warned that possible VAT increase could spell trouble for the tourism industry. Finance Minister Tito Mboweni was expected to deliver his 2020 Budget address on Wednesday afternoon. 

Duminy said there had been much talk by economists that there could be a VAT increase. “The South African fiscus is in desperate need of cash and such a decision would no doubt answer such a need, in the short term. While our tourism industry, particularly when compared to the rest of the economy, is a bright spot, it should be noted that such a move could spell trouble for the industry.”

He said via a statement that a VAT increase is a concern as it would raise business costs.

“Tourism businesses will have to rethink their marketing and pricing strategies to compensate, as well as seek out other ways of increasing efficiency to compensate for a VAT increase, or else put some mechanism in place to recover the VAT input tax credit. Our visitors will end up bearing the brunt of these increases.

“There are also other impacts to be considered when it comes to a possible VAT increase. Restaurants, venues, transport, and food industries, which all form part of the wider tourism economy, would all be affected, possibly decreasing the desirability of South Africa as a destination to travellers,” he said. 

Duminy emphasised the current issues. He said the current electricity crisis continued to be a concern for travellers and needed to be alleviated by clear government intervention. He also believed that safety and security was another element where the government needed to take the lead. 

“Looking towards this Budget Speech, we will be hoping that Minister Mboweni can answer these concerns which will allow for the tourism industry to continue to be a sector of our economy where we continue to see growth and job creation.

 “Budget 2020 is not just about the numbers, but also about the importance of government to communicate clearly around a strategy which will eventually lead us a well-functioning economy,” added Duminy. 

The CEO of BON Hotels Guy Stehlik said the Tourism Amendment Bill had been a topic that ruffled many feathers last year. 

“Being in the hotel management business, we have a direct interest in the possible implementation of the regulation, tourism levies and taxation in this regard. Further to the tourism industry, we welcome the President’s announcement of the Tourism Police concept during his State of the Nation Address, and hope that Minister Mboweni’s allocations will include provision for the implementation of this concept.”

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