Similar to many other sectors, the government now decided to impose 15 percent value added tax (VAT) on the tourism sector in the budget for the fiscal year 2024-25.
Responding to the government decision, Tour Operators Association of Bangladesh (TOAB) - the apex tourism association of the tourism sector - demanded withdrawal of the VAT. President of TOAB came up with the demand in a meeting with the President of Federation of Bangladesh Chamber of Commerce and Industry (FBCCI).
The TOAB president further added that tour operators and hotel owners do not have the opportunity to charge VAT from tourists, and also the hotels where tourists stay in are subsidized by the government on food and accommodation. Understandably, if VAT is imposed separately on tour operators and hotels, the tourism sector, and tour operators in particular will suffer.
However, we believe there is a strong logic behind the demand to withdraw the 15 percent VAT by TOAB high-up.
In the post-pandemic years our tourism sector is not doing well despite huge potentials, and is largely dependent on domestic tourism. Moreover, for years on end it has markedly failed to attract foreign tourists.
Being apprehensive of whatever flow of foreign tourism to decline, already most service related costs including accommodation fees are higher in Bangladesh compared to neighbouring countries. Now, the new VAT will most likely push tourism costs to a new height which would further decrease tourist in-flows to the country.
However, Bangladesh attracted a mere 6.5 lakh foreign visitors in the last year which is significantly lower compared to India, Maldives, and Sri Lanka. The tourism industry currently contributes around 3 percent of Bangladeshs gross domestic product (GDP) with $13.8 billion in revenue. In addition, the industry has achieved an average growth of 15 percent annually, excluding the pandemic period.
Now it will be undeniably challenging to move ahead with costlier tour packages.
We urge authorities concern to re-consider either removing the new VAT scheme or bringing it down to a single digit.
As for attracting foreign tourists, there yet exist far too many barriers to feel welcome in Bangladesh. Either it is the unnecessarily cumbersome visa process, or to ensure safety within our borders, and to provide amenities and facilities conducive of a healthy environment for tourists. We are left with plenty to do before we are ready to be an attractive destination for foreign tourists. That said - imposing extra VAT on tour operators would ultimately result in tour packages getting expensive inviting lesser number of foreign tourists.
In terms of affecting domestic tourism, local tourists would likely refrain from booking tour packages while undertake private tour journeys.
Time is still there to re-structure and re-consider the new VAT policy.
