Hoteliers in Uganda have not given up hope of lobbying the government to waive VAT on upcountry hotels and lodges, citing rising operational costs amid low business.
In April, the Ugandan parliament overturned a presidential directive that the facilities be exempted from the 18% Value Added Tax, which would have been reflected in the new budget.
Uganda Hotel Owners Association Chairperson, Susan Muhwezi, said the upcountry hotels and lodges were unoccupied for most of the year, but investors still had to meet operational costs such as electricity, water and workers’ salaries.
Hotels outside Kampala, she said, were operating at an average occupancy of between 28% and 30% while lodges in the parks at 7%, only rising to 17% during peak seasons.
The Executive Director of Uganda Hotel Owners Association, Jeanne Byamugisha, said for a hotel to break even, it must operate at 40% occupancy, meaning only hotels in Kampala could achieve that. “That’s why we are lobbying for tax exemption for hotels and lodges outside Kampala that have been struggling to stay afloat,” he explained.
During a Presidential Investor Round Table in November last year, hoteliers sought a five-year VAT exemption to allow the industry to grow.
Ugandan President, Yoweri Museveni, by then had directed the Ministry of Finance, Uganda Revenue Authority and Uganda Investment Authority to implement the exemption in the 2017/2018 financial year.
The Treasury made a range of tax amendment proposals on VAT for the tourism sector, which were approved by the Cabinet. But when they were presented to Parliament in April, the Committee on Finance, Planning and Economic Development turned down the exemption.
Players in the industry argue that the tax has had negative implications to the competitiveness of Uganda’s tourism sector compared with other East African countries.
The tax charges, they added, have made holiday packages in Uganda more expensive than Kenya.
Some lodges in Uganda’s national parks, they say, charge US$400 per night as a result of the hefty tax charges while in Kenya, a tourist can enjoy a three-night stay at US$600.
