The Government through the VAT Act 2013 revoked VAT exemptions hitherto applicable for a wide range to tourism services including tour operator services and park fees.

 The revocation of the exemption came at a very wrong time time when the destination is suffering from the effects of negative publicity.

 

There are a number of concerns that were raised to counter the is revocation and these are still valid today as follows:

 1.   Forward Bookings:

 

Tour operators (and indeed Kenya’s tourism industry) work on a system of forward bookings where visitors plan their holidays well in advance – sometimes up to a year. To facilitate the forward planning of holidays, tour operators and other hospitality providers are obligated to publish their costed tour itineraries and avail the same to overseas Agents at least one year in advance.  Tour operators further prepare Brochures that are valid for up to 18 months.

 

This requires that any changes affecting quoted costs are introduced with a lead time that allows for communication the affected clients/Agents.

 

2.   Regional Disparities:

 

Kenyan Tour operators stand to be seriously disadvantaged in the EAC Region due to the recent imposition of VAT.   Majority of the EAC countries do not charge VAT to tour operations and indeed, Tanzania and Uganda have both recently shelved VAT proposals for various tourism activities that Kenya has recently imposed VAT on.

 

3.   Intermediary Services:

 

Tour operations fall in the category of what is commonly known as “intermediary services” and these are generally not subjected to VAT.   Examples of other intermediary services which are currently exempt include Coffee and Insurance Brokers.

 

4.   Economic Impacts

 

A Continued downturn in tourism will adversely affect several sector of Kenya’s economy due to the high level of backward and forward linkages.  A key area of impact will be unemployment.