Dar MPs oppose tax exemptions for hoteliers By CHRISTINE AFANDI Special Correspondent THE EAST AFRICAN The issue of foreign owned tourist hotels in Tanzania being exempted from paying tax has generated heated debate in parliament with most parliamentarians openly opposed to the tax holiday. The MPs say the exemption gives undue advantage to foreign investors over locals. While contributing to the debate on this years budget, most MPs were in agreement that the government should review the tax holiday with the aim of reducing or completely doing away with it as soon as possible. Opinion was unanimous that the five year tax holiday offered by the government as an incentive to lure potential investors into the lucrative tourism and hotel industry was a burden to the country. A number of legislators who contributed to the debate claimed that some investors had resorted to renaming their hotels and other related ventures and effecting management changes in dubious circumstances in order to profit from the scheme. MPs argued that local investors in the hotel industry do not trade on equal terms with their foreign counterparts as they are bogged down by huge taxes while making less profit compared with foreign owned hotels. Maulida Komu, an opposition MP from Chadema party said most investors doing business in the hotel sector were making profit while paying very little in taxes and other dues to the government. For years, they have been evading taxes, thanks to the loopholes made available through the tax holiday, causing the government to loose billions of shillings in revenue from the sector, said Ms Komu. Some MPs claimed that some foreign owned tourist hotels in Dar es Salaam, Mwanza and Arusha had been changing names after expiry of the grace period. It was widely expected that during this years budget, the government would do away with the tax holiday as an incentive. But Mr Mkulo did not effect the changes, which have been the subject of debate each year drawing the wrath of most MPs. This is an area the government was supposed to work on in order to get more revenue. This is one of the least tapped areas in the country in terms of tax collection, said Ms Komu. The MPs expressed their disappointment that the government had continued to impose heavy taxes on beer, soft drinks and cigarettes while being lenient on foreign investors whose contribution in taxes would help spur economic growth. Tourism is currently the fastest growing sector of Tanzanias economy and the leading foreign exchange earner. The government through the Ministry of Tourism and Natural Resources has been conducting promotions aimed at marketing Tanzania as a tourist destination. The sector accounted for 17.2 per cent of the GDP and 25 per cent of total export earnings. Recent marketing initiatives have included branding Tanzania as a major tourism and investment destination by the Tanzania Tourist Board in collaboration with Tanzania Investment Centre. They have specifically targeted Western countries and they expect tourism earnings to exceed $1 billion this year. But the number of tourist hotels and occupancy capacity is still low compared with the number of tourists projected to visit the country. More modern hotels need to be put up especially in Dar es Salaam and other major towns, which has made the government to offer the five-year tax holiday as an incentive to lure more investors into the sector.