Tax regime hurting tourism sector — Experts
Speakers at the Graphic Business/ Stanbic Bank Breakfast Meeting have cited the unfavourable and complicated tax regime, lack of investment, poor road network and poor customer service as the major challenges affecting the development of the country’s tourism sector.
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They argued that if these challenges were resolved, the sector, which is a major contributor to GDP and a major source of foreign exchange receipts, could play a critical role in the development of the country.
The speakers were Tax Partner at PwC, Abeku Gyan-Quansah, Chief Executive Officer of the Ghana Tourism Authority, Akwasi Agyemang, and the Managing Director of Labadi Beach Hotel, David Eduaful.
The meeting, which brought together players in the creative industry, hoteliers, regulators, and policymakers was held on the theme: “Tourism the Golden Egg; a Shared Responsibility.”
Mr Gyan-Quansah said unlike in the 1990s when the state supported the sector with some tax concessions, the sector was now treated as a leisure activity hence the introduction of some taxes. “The state is now treating tourism as a leisure activity which means that if you engage in some tourist-related thing, the belief is that you have made some money and therefore you need to contribute more in taxes”.
“Before 2002, you could go to a hotel and not pay VAT but that is not the case anymore. And at a point in 2014, when we knew that domestic airlines should also promote tourism, we still slapped VAT on it,” he stated.
The tax expert also pointed out that the overall tax regime of the country was unnecessarily over-complicated which also affected the tourism industry.
“Our income tax regime is avoidably complicated, why is it that if you want me to charge someone for a particular service, why must I charge VAT, health levy, COVID levy and GETFUND levy, why can't we just have a simplified and straight forward regime,” he questioned.
He also called for a conversation on having a fixed tax rate for all players in the tourism sector to ensure fairness and uniformity.
“Hotels are part of the tourism sector but they are the only unit that is taxed at 22%, the others still pay their respective headline rates so we should have a conversation on getting a fixed rate for all players in the sector,” he said.
High cost of inputs
For his part, David Eduaful said the industry does not enjoy any tax concession at the moment and is even paying more now due to the tourism levy.
He said because of their international customers, it had become difficult to source some of their raw materials and foodstuff locally because they did not meet the standards.
“We are looking for quality that will satisfy our international customers and it’s so difficult to get that quality here in Ghana.
“The meat that we use for our food, we import from South Africa and the import duty alone is over 60 per cent. When it comes to beef, we are paying over 78%, and with other products, we are paying about 56 per cent,” he noted.
He said this coupled with the high utility tariffs was what increased their cost of operation, leaving them with no other choice than to pass on the cost to consumers.
He, therefore, urged the government to grant some tax concessions and incentives to spur growth in the sector.
Mr Eduaful also cited poor customer service as a key challenge for the sector, stating, “We must look at customer service because here we feel like we are doing the customers a favour but it’s not like that in the Western world so when you treat them like that, it affects tourism.
“We need to pay attention to our beaches because it has the potential to generate money. We have some of the best beaches on the planet,” he said.
Lack of investments
Mr Akwasi Agyemang also noted that despite the contribution of the tourism industry to the country, the sector was still starved of the needed investments to allow it to grow and become the golden egg of the economy.
He said in his seven years as the CEO of the GTA, the authority had never received capital budgetary support from the government and had been relying on the Tourism Development Fund which was inadequate.
He noted that the Tourism Development Fund averagely generated just about $1.5 million annually and that was what the authority used in its marketing activities as well as fixing tourism sites.
“We need some funding from the government, let's pump more money into tourism and we will reap the benefits,” he stated.
Using the renovation of the Kwame Nkrumah Memorial Park as an example, he said the success of the project was an indication of what could be derived if more investments were made into the sector.
“In 2019 which was the peak period, 98,000 people visited the park the whole year but six months after the renovation and opening, we have about 300,000 people visiting and this shows that if we invest more, we will get more,” he said.
The CEO also identified the poor road network to some of the tourist sites, the difficulty in getting visas to visit Ghana and the poor customer service culture as some of the challenges impeding the growth of the sector.
