The Tourism Fund has engaged a debt recovery agency to pursue outstanding levy arrears as it steps up enforcement and seeks to seal revenue leakages that have accumulated over years, including during the Covid-19 period.
The debt is in excess of Sh1billion even though the Fund declined to disclose the exact amount.
Tourism Fund Board of Trustees chairperson Samson Some said the move is part of a broader strategy to separate current compliance from historical debts, some of which involve defunct businesses and government institutions: “We have engaged a third party in areas of collection and there is a tremendous response to that,” Mr Some said in an interview.
He added that the board has prioritised near-full compliance on levies currently being collected, while handling legacy arrears under a separate policy framework.
The tourism levy, charged at two percent of gross sales by regulated hotels, restaurants and tourism establishments, is collected on behalf of the government and must be remitted to the Tourism Fund by the ninth day of each month.
Mr Some said misunderstandings over the nature of the levy have contributed to past defaults, with some operators treating it as a business liability rather than a pass-through charge collected for the State.
“This is not money owed by the institution. It is money collected on behalf of the government,” he said.
The Covid-19 pandemic worsened non-compliance as tourism businesses struggled with cash-flow constraints and prioritised commercial debts amid prolonged shutdowns.
However, Mr Some said the pandemic does not fully justify arrears, since the levy is embedded in consumer pricing.
Complicating recovery efforts are cases involving government institutions and establishments that are both levy defaulters and beneficiaries of Tourism Fund financing.
“You find some institutions owe the fund, yet they are also funded by us. That creates a dynamic that has to be addressed carefully,” Mr Some said.
Under the new approach, the fund is relying on debt collectors to pursue recoverable arrears while applying tailored solutions to long-standing cases with legal or institutional complications.
The Tourism Fund relies on levy collections to finance tourism marketing, infrastructure and development projects, making compliance critical as the sector rebuilds and the fund seeks to broaden its revenue base.
Latest disclosures contained in the Tourism Fund’s Fifth Strategic Plan (2024/25–2028/29) show that, as of the period ending June 2023, an estimated 13,069 establishments were liable to pay the tourism levy.
However, about 69 percent of the establishments complied, leaving a default rate of 31 percent.
The fund estimated the levy revenue base for regulated Class A establishments (including hotels, villas, guest houses and serviced apartments) and Class B (food and beverage service providers such as restaurants and cafes) at Sh3.815 billion in that year ended June 2023.
Businesses under Class A accounted for Sh1.84 billion, while those under Class B made up Sh1.98 billion of the levy receipts.
However, the figures exclude several segments that the fund says represent significant untapped revenue streams, including Classes C, D, F and G, which the Fund says could add about Sh1 billion within two years if fully brought into the levy net.
Classes C establishments cover tour operators and travel agents, D (safari guides), F (hot air balloon operators and private air safari charter companies) and G (event organisers). Revenue from online booking platforms such as Airbnbs, estimated at 8,000 units, was also not included in figures disclosed by the Fund.
The levy collections have since risen to Sh4.9 billion in the 2023/24 financial year and Sh5.1 billion in 2024/25. The Fund attributes the growth to improved enforcement, expanded collection efforts and higher compliance among existing operators.
It cautions that persistent structural default remains a challenge, particularly among long-standing defaulters, institutions with legal complications and entities that have since ceased operations.
Mr Some said a measly one percent of establishments are currently defaulting on ongoing levy remittances, a sign that tighter controls are reducing the risk of fresh arrears.
“The focus now is to make sure current compliance is almost 100 percent so that we are left dealing with only one factor: historical arrears,” he said.
