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Tax on cruise ships causing concern in Kenya

Oct 14, 2009

Nairobi — Fears have gripped the tourism industry over the planned Value Added Tax that is to be introduced on cruise ships calling at the port of Mombasa with stakeholders calling on the government to urgently address the issue.

The introduction of the tax comes at a time when the maritime industry is grappling with the rising operating costs resulting from piracy activities in the Indian Ocean off the Somali coast and particularly at the Gulf of Aden, a major maritime link between Europe, Asia and Africa, they said.

Increased piracy in the Gulf of Aden has not only pushed insurance and freight costs high but also become a threat to cruise liners. Early this year during the last season which ended in April, Somali pirates attacked a cruise liner, but the captain outmanoeuvred the pirates.

The 16 per cent VAT intended to be levied on cruise liners calling at the port is bound to adversely affect the industry should some cruise liners cancel their intended calls, Kenya Association of Hotel Keepers and Caters coast branch chairman Mr Titus Kangangi said on Wednesday.

"This is the wrong time to slap such a levy on tourism products given that the industry is yet to recover from problems caused by other factors including the economic global recession," he said.

"If you for instance consider what happened during the post election violence when all charter flights were diverted to Zanzibar you realise that such a move would not be any different. All cruise liners would seek other ports of call to the detriment of our struggling industry," Mr Kangangi added.

He noted that it does not make economic sense for the government to collect a few additional dollars from a vessel whereas the economy would benefit more from thousands of dollars that those tourists spend.

On average each tourist spends about US$200 (Sh15,000) during a single call. Some cruise liners can carry up to 2,800 passengers including crew members.

"The government should think of how to attract more cruise ships by even giving incentives to cruise liners including a discount on the current port charges instead of slapping this VAT," he said.

Abercrombie and Kent managing director Mr Auni Kanji said if the tax is imposed it would spell doom for the industry. "We are expecting up to eight cruise calls in the next season which begins next month and it would disastrous if the government goes ahead with the plan," he said.

Noting that there have been no cancellations for the cruise calls yet, Mr Kanji was hopeful that the current negotiations going on between the ministries of Tourism and Finance would come up with a solution. "We don't want to think negatively at the moment," he said.

The company handles ground operations - including safaris to game parks and transfers to hotels - for cruise liners calling at the Mombasa port.

Tax on cruise ships causing concern in Kenya
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