Addis Ababa, Ethiopia — In a
landmark decision that has ignited significant debate, the Ethiopian House of
Representatives has passed a resolution to amend the existing VAT proclamation,
imposing a 15% Value-Added Tax (VAT) on tour operators' total tour sales. This
new tax, set to take effect in three years, will be collected from tourists
using the services of tour operators, raising concerns and opposition from the
Ethiopian Tour Operators Association (ETOA).
ETOA's
Opposition
The Ethiopian Tour Operators
Association (ETOA) has strongly opposed the VAT imposition since the initial
proclamation over two decades ago. During the recent public hearing at the
House of Representatives, ETOA presented professionally argued points, yet they
were largely unaddressed by the legislative body. The association highlighted
global, logistical, and practical challenges that could hinder effective
implementation. Specifically, ETOA representatives pointed out the difficulty
in obtaining legally acceptable, VAT-compliant receipts from various service
providers, especially in regions outside the capital.
Challenges
in Receipt Collection
ETOA has raised concerns about the
complexity of acquiring receipts from major tourist attractions, including
churches and historical sites, which are not legally mandated to register as
VAT payers and therefore do not provide formal VAT receipts. Additionally, a
significant portion of tourism expenses involves payments to local guides,
community members, and villagers, who often do not issue receipts, further
complicating tax collection efforts.
Impact
on Competitiveness
The association warned that the new
VAT could undermine Ethiopia's competitiveness as a tourist destination
compared to neighbouring countries. The additional cost burden on tourists
might drive them to choose more affordable destinations in the region,
potentially reducing tourist inflows to Ethiopia.
Existing
Safety Concerns
ETOA also emphasized the current
challenges facing Ethiopia's tourism industry, including the lingering effects
of the COVID-19 pandemic and recent conflicts in the northern part of the
country. These events have led to travel advisories against non-essential
travel to Ethiopia, resulting in significant business closures and job losses
within the tourism sector. ETOA President Fitsum Gezahegne argued that even if
peace and stability were restored immediately, the industry would require at
least a decade to recover. The introduction of the VAT, in this context, was
described as “another bullet on the head” of the struggling industry. The
government, however, anticipates a faster recovery within three years.
Issue of
Illegal Tour Operators
ETOA also highlighted the issue of
illegal tour operators who may evade the new VAT requirements, potentially
undercutting legitimate businesses and exacerbating competitive disparities.
Government's
Perspective
Despite these concerns, the Ministry
of Finance maintains that the VAT is a necessary measure to align the tourism
sector with the broader national tax framework, contributing to national
revenue and economic development. A ministry spokesperson stated, “We
understand the concerns of the tour operators, but this tax is a necessary step
towards ensuring that all sectors contribute fairly to our national
development.”
Industry
Response and Future Outlook
Considering the impending VAT,
industry stakeholders are advocating for a collaborative approach to address
these challenges and develop practical solutions. ETOA has urged the government
to consider the unique dynamics of the tourism sector and to work together to
devise a feasible implementation strategy. “We are not opposed to contributing
to the national economy,” said ETOA President Fitsum Gezahegne, “but the
current proposal does not consider the practical realities of our industry. We
need a solution that is fair and practical for all parties involved, enhancing
revenue and foreign currency income from tourism.”
Conclusion
The proposed 15% VAT on Ethiopian
tour operators has sparked significant debate within the industry. While the
government aims to increase national revenue, the practical challenges and
potential impact on the sector's competitiveness underscore the need for a
thoughtful and collaborative approach. As the implementation date approaches,
continued dialogue between the government and industry stakeholders will be
crucial in shaping a sustainable future for Ethiopia's tourism industry.
Stay tuned for further updates on
this developing story and its implications for the future of tourism in
Ethiopia.