Effect of Value-Added Tax (VAT) on the Demand for Tourism Services: Evidence from Tanzania

Abstract

This study examines the influence of Value-Added Tax (VAT) on the likelihood of tourists visiting Tanzania. The study employed a mixed approach by collecting and analyzing both quantitative and qualitative data. The study applied simple random and judgmental sampling techniques to select 110 respondents from the targeted population. The research used questionnaires, interviews and observation to collect primary data. The study conducted descriptive and regression analysis (binary logit model) to estimate the likelihood of tourists visiting tourist sites in the country. Descriptively, the findings reveal that 83 per cent of the respondents were affected by the high prices charged on tourism services like transport, accommodation and meals. 95 per cent of the respondents perceive the 18 per cent VAT charged on various tourism services as relatively high. The findings imply that a considerable number of visitors are sensitive to the rate of VAT imposed on tourism services. 90 per cent of the respondents were comfortable with the infrastructure in different tourist sites (national parks and game reserves) in the country. 69 per cent of the tourists are attracted to visit Tanzania due to the peace and security status in the country. Moreover, 97 per cent of the tourists visited the country because of environmental conservation and fighting against poaching efforts. As per the findings of the binary logit regression analysis, the study found that VAT, education level, price, infrastructure, peace and security, and destination marketing have significant effects on determining the likelihood of tourists visiting Tanzania.