Economy

Workers shun Uhuru's tax holiday offer

locals

Local tourists at a deserted public beach in Mombasa. PHOTO | KEVIN ODIT

Kenyan workers are not making use of the tax incentive they were offered in June as authorities moved to shore up the tourism industry in the wake of a sudden dip in the number of foreign visitors caused by security concerns.

The Kenya Association of Hotel Keepers (KAHC) Tuesday said the tax incentive has had no impact on the industry as workers appear to have ignored it.

“There has been zero uptake of the tax incentive,” said Mike Macharia, the KAHC’s chief executive, adding that the lack of a culture whereby companies pay for their employees’ vacation was to blame.

Mr Macharia also faulted the structure of the incentive, saying it only addresses an employee’s holiday costs, excluding that of their spouses and children who would have to pay their own way if they were to go on vacation together.

The incentive was part of measures that President Uhuru Kenyatta announced in May, and which Treasury secretary Henry Rotich included in his Budget to boost domestic tourism.

The directive, which came into effect on June 12, was expected to see at least 25,000 Kenyans go on a week’s holiday every month at the expense of their employers.

READ: Tax incentives planned to boost tourism

Mr Rotich in his Budget speech suggested amendments to the Income Tax Act to allow deduction of holiday expenditure incurred locally for a period of 12 months.

KAHC’s assessment of the policy’s efficacy is, however, in sharp contrast to recent comments by Tourism secretary Phyllis Kandie suggesting there was positive uptake of the tax rebate.

Mr Macharia said other measures aimed at boosting domestic tourism have been more fruitful, including the reversal of an earlier directive barring government agencies from holding meetings in hotels.

The reduction of landing charges at Mombasa International Airport is also expected to encourage more domestic and international arrivals at the Coast, which is famous for its beach holidays.

While acknowledging measures taken by government to shield tourism from further decline, Mr Macharia said negative travel advisories continue to plague the industry.

The US, the UK, France and Australian governments in May issued travel advisories warning their citizens against travelling to Kenya, a move that gravely impacted on tourist arrivals at the coast.

Dutch Airline KLM and the Korea Airlines last week discontinued operating charter planes to Mombasa, in addition to Thompson’s Charter that pulled out immediately the advisories were issued.

Charter flights

The withdrawal of the charter flights from the Coast has meant loss of business in the near term.

“The airlines brought in approximately 600 tourists per week and falling tourist numbers means reduced business for hotels that has translated to some staff layoffs,” Mr Macharia said.

The Kenya Union of Domestic Hotels, Education Institutions, Hospitals and Allied Workers (KUDHEIHA) said the rate at which hotels were shutting down at the Coast was alarming.

“In Diani south coast, five hotels have closed shop while in Malindi and Lamu, 15 closed for lack of business. Only seven hotels are operating in the area with occupancy rates that are as low as 14 per cent,” said Albert Njeru, KUDHEIHA’s secretary general.

Another hotel in Malindi that employs 300 workers is set to cease operations in September, worsening the employment outlook in the hospitality industry, he said.

“The workers are sent home on compulsory leave while those left behind operate on half pay.”

Besides the travel advisories and insecurity at the Coast, tourism sector players said the introduction of consumption taxes in the industry has made Kenya less competitive compared to rival destinations in East Africa.

A leading Kenyan hotel chain has disputed official figures for tourist arrivals, saying violent attacks by militant Islamists have scared away far more tourists than the authorities admit.

The Kenya Tourist Board (KTB) said tourist arrivals in the first four months of the year were down four per cent from a year earlier to 381,000, statistics that have been contested as having underplayed the industry’s malaise.

TPS Eastern Africa said its own survey for the first half of the year showed business on the coastal circuit fell by between 30 per cent and 50 per cent last year while inland trips to destinations such as to the Masai Mara game reserve and Mount Kenya had fallen by 20 per cent.