Tourism levy riles hospitality sector
…urges minister to review
MATHATISI SEBUSI
MASERU – The Lesotho hospitality sector is unhappy with the new tourism levy that is expected to be implemented starting July 1, claiming the levy will not only negatively impact their businesses financially but will also drive away tourists who are already struggling to make it into our borders. The sector players have, as a result, written to the tourism minister, the Principal Secretary in the ministry as well as the Chief Executive Officer at the Lesotho Tourism Development Corporation (LTDC) requesting a meeting to discuss their grievances.
Chairperson of Lesotho Hotels and Hospitality Association, Tsunyane Tšotetsi said while they are in agreement with the principle behind the introduction of the tourism levy, since it is done in other countries, implementation of the levy in Lesotho has serious implications which need careful and urgent consideration. He said they find the proposed five percent levy too high and will, as a result, discourage tourists and visitors from visiting their hotels and accommodation facilities.
He noted that adding the five percent levy to the normal room rates charged will make the accommodation charges heavy for the already struggling visitors further stating that there 15 percent VAT already added to the room rates. He said the government is already charging 5 percent withholding tax on the industry and the ministry of tourism has also announced a 6.5 percent increase on wages across board, noting that the charges are too much for both the hospitality industry and their clients.
The levy implementation will also affect pre-negotiated contract arrangements already in place signed with some companies in which room rates were agreed upon for the period of a year. He said the five percent levy, if implemented, more businesses are going to suffer further losses with the worst being re-possessed for failure to meet loan obligations. “The tax burden has become very high and has to be passed on to the visitor, which will make it difficult to attract guests to our establishments.
“The very business, the majority of which are small to medium, that the levy is supposed to support are going to continue to be negatively affected and may even reduce the number of establishments within the sector,” he said. The cutoff for remittance of the collected levies which is collected on the 10th day of the month is not practical as some payments are received well after the said date, he added.
The government usually pays after six months or even years and some companies in the sector are owed for more than two years to date. He said there are also contractual arrangements to bill some companies or institutions after usage or per usage and payments are received well after the 10th day of the following month. Tšotetsi said the implementation of the levy will also affect the industry negatively as they occasionally offer free rooms or accommodation to potential guests as part of their marketing and promotion strategy.
This includes site inspections from tour operators and travel agencies. As a result, the proposed expectation is that the levy should be collected from or for the guests, which effectively means the establishment is expected to pay from its coffers. Tšotetsi further noted that they are concerned about their representation within the fund oversight committee that will administer the levy, noting that they are represented by only one person from the private sector in the complementary of six members.
He said they strongly urge that a review and an increase of members from the private sector be made, further proposing at least a minimum of 50 percent private sector representatives which he says makes more sense as 50 percent of the collected levy is intended to support development within the private sector.
Also of concern in the sector is the use of the levy for road infrastructure development where Tšotetsi noted there are already agencies responsible for development and maintenance of roads and, as a result, they recommend a review of the intended use of the levy. He said they, therefore, wish to discuss the possible postponement of the implementation of the tourism levy of 2022 for further consultations before parliament closes.
“We humbly request that the intended implementation of the levy in its current form be deferred until full and more meaningful consultations are concluded with the private sector. “There are options available which we are willing to table for discussion, which include a flat rate or amount, a lower rate of 0.5 percent as in other countries which are less than 1 percent after many years of service, a phased rate over a period and incentives for collectors for motivation upon added administration work,” he said.
He said the communication to responsible authorities was made on May 20 but to date they have not received a concrete answer on when they can meet with the concerned authorities. Tšotetsi said their concern is that if the authorities take long to respond to their request for a meeting, they might be burdened with the levy as parliament is about to close for elections.
Speaking to Public Eye, Minister of Tourism Ntlhoi Motsamai confirmed receiving the letter from the association. She, however, noted that the challenge was that Lesotho Hotels and Accommodation Association picked their own date for the meeting which is a no for them as government. She said she will attend to the matter and set a date when she can meet the association. This comes after Lesotho Tourism Development Corporation (LTDC), Thetso Thamae, on behalf of Chief Executive Officer at LTDC announced that effective from July 1 the institution will implement the tourism levy.
He said the implementation is supported by the Tourism Act which was amended in 2022 and empowers the minister of tourism, environment and culture to craft regulations that will govern the implementation and collection of the tourism levy.
He said the regulations were developed after consultations with tourism business operators across the country. Thamae said the tourism levy is meant to, among others, allow the business of tourism to reinvest to the tourism industry and support promotion of Lesotho as a destination of choice for local and international travellers.
He further noted that 50 percent of the collected levy will be used for development and maintenance of tourism products and facilities, including installation of tourism specific signage, building capacity of tourism enterprises, marketing of places of attraction and training of front liners. He said the tourism levy will be 5 percent for accommodation facilities, M10 for visiting local attractions(adults), and M5 for children.
Foreign adults will be charged M20 for visiting an attraction destination while their children will be charged M10. Leisure vehicles passing through border ports will be charged M20, leisure motor bikes M10, leisure boat M20, speed boat M20 and events tickets will be charged a levy of M10 and a travel agent M10 while a tour operator will be charged M1 000 per year.
