Uganda: Tourism Sector Seeks Tax Relief

Uganda Tourism Board (UBT) has asked government to consider tax reliefs for players in the tourism value chain to help them deal with the effects of Covid-19.

Among the relief considerations, according to UTB, is tax deferrals for at least 12 months and a 40 per cent reduction in utility bills, especially for the hotel sector.

Speaking in an interview early this week, Ms Lilly Ajarova, the UTB chief executive officer, told Daily Monitor the tourism sector was now on a standstill, projecting that Uganda is likely to lose at least more than $1.6b this year due to Covid-19.

"The losses incurred to date by the players in the industry ranges from cancellation from now to over a year. We are still conducting a survey to establish the exact monetary value. However, if I have to go by our projections, we will be losing not less than $1.6b, which is what we earned last year as a sector," she said.

The tourism sector has in the last five years been one of Uganda's largest income earners, contributing about 7 per cent of Uganda gross domestic product.

Employment

The sector employees about 500,000 Ugandans and UTB had projected a growth of at least 10 per cent this year along.

However, the Covid-19 disruptions will have far reaching implications both in the short and long term.

Government had been seeking to grow tourism numbers to at least four million by 2022 from the 2.2 million projected arrivals in 2019.

However, according to Ms Ajarova, the current disruptions have seen a sharp drop in all tourism-related activities and a number of employees have already sent most of their staff home on either indefinite leave or pay cuts.

On the other hand, she said, many employers in the sector are looking for money to refund cancelled bookings, which has not only affected their cash flow but has eaten into their working capital.

"The losses are directly to all the operators along the value chain [such as] tour operators, travel agents, guides, accommodation owners (hotels and lodges), transporters including airlines, crafts sellers, food suppliers and destination owners such as national parks among others," she adds.

In a petition addressed to President Museveni at the close of last month, the business community under Private Sector Foundation Uganda asked government to ensure business continuity through offering tax reliefs and deferrals for contributory schemes such as National Social Security Fund.

Ms Ajarova also told Daily Monitor that they had petitioned government through the Ministry of Finance with a number of recommendations mainly in regard to taxes and bills payment.

UTB, according to available data, has so far seen negative growth in international tourist and business arrivals of -1 per cent.

Before the Covid-19 outbreak, arrivals had been predicted to grow by between 3 and 4 per cent for the period ended 2020.

As of March 15, 2020, an estimated $2m had been lost by only five hotels due to cancellations.

Recommendations

According to Ms Ajarova, government should consider tax reliefs in the area of value added tax for 12 months across the tourism value chain.

She also notes that government should consider deferral for advanced corporate tax payment, waive pay as you earn for a period of 12 months as well as consider a reduction of 40 per cent for accumulated utilities bills, key among them water and electricity, especially for the hotel and accommodation sub-sector.

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