Are increased taxes and visa fees a help or a hindrance to the African economy?

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Nigel Vere Nicoll is Chief Executive of Atta, The African Travel & Tourism Association, which serves travel companies in the African travel sector in 37 countries around the world. For more information visit www.atta.travel.

NigelATTAYou may find it strange that the very person whose job it is to promote tourism in Africa is penning this on a remote Greek island and, yes, I am hot under the collar. For by the time you read this we will know more about Greece’s immediate economic future, but right now the scales are tipping backwards and forwards, and the endgame remains unclear.

One factor that could tip the scales the wrong way is the insistence by the European Central Bank that Greece removes its tax concessions to tourism, which could herald a 100 per cent increase in VAT on the hotel bills of their beautiful islands. The market is incredibly competitive and these demands to increase the taxes paid by tourists, in order to increase tax revenue, has the opposite effect and will simply drive them elsewhere, reducing not growing the overall revenue from this sector.

What a disaster for a country that exports very little and relies so heavily on tourism. Sun and blue seas are the same in many tourist destinations across the world, and ultimately it is price that influences the final decision on where to go and that price, with added taxes, may just not be competitive in global markets.

IATA (International Air Transport Association), the trade association of most of the world’s airlines, representing approximately 84 per cent of all total airline seats, recently published a report stating that a 10 per cent increase in prices reduces demand for travel by 15 per cent. Similarly, rises in visa fees and VAT do exactly the same and simply reduce demand for that destination.

When will these monetary experts and finance ministers learn that tourism and taxes are mutually contradictory? In many cases, the revenue raised is far outweighed by the economic benefits that are foregone as a result of the reduced demand for tourism. Let’s agree that, generally, governments increase tariffs and taxes on such items as tobacco when they intend to dissuade their consumption, not promote it. So why do the same with tourism taxes and tariffs, which will ultimately dissuade tourists from coming at all?

So the Greek problem is not unique, and on my patch, many African governments have not got the message either. We have seen surges in visa costs and even the introduction of unnecessary bureaucratic paperwork at borders across East and southern Africa this year. Yet the trivial sums raised from visas will not begin to cover the overall loss of revenue from this sector. Indeed, valuable tourists will instead be driven elsewhere.

Africa needs tourism. In South Africa, for example, it puts food on the plates of one in seven people. The pages of this very magazine provide an intoxicating menu of travel choices across this great continent. But we in the industry also understand that when governments unexpectedly raise taxes and the cost of visas, even “the best of all possible worlds” loses its competitive edge. We know that. But do our political masters?

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