NAIROBI, KENYA: Local travel agents have threatened to close down their businesses and relocate to neighbouring countries.
They cited a hostile operating environment partly brought about by intensified implementation of the Value Added Tax (VAT) Act 2013.
The agents are complaining of diminishing returns as the one per cent commission paid to them by airlines is subjected to taxation.
The international travel companies with local holdings are expected to follow the same trend. This implies that tickets sales to local customers will be carried out from neighbouring countries.
Kenya Association of Travel Agents Chairman S.G Kaka said that in spite of a vigorous lobby effort by the association against the Act, the travel industry will no longer enjoy statutory exemptions from VAT on its services.
“Travel agents operating in Kenya will now have to charge VAT on services and pass it on to the ultimate consumer,” he said.
Before the enactment of the VAT Act in August this year the travel industry had been enjoying tax exemption on services offered to travelers.
Mohammed Wanyoike of FCM Charleston Travel Company said his company is considering reducing its businesses in Kenya and expand ing operation outlets in Tanzania, Rwanda, and Southern Sudan.
“We are currently assessing the impact of VAT on our business before making a concrete decision. In the next six months to one year we will have decided what to do, but relocation is one of the options,” he said.
Travel agents are also fighting a threat by the International Air Transport Association (IATA) to cancel licences of 10 leading travel agencies over non-payment of proceeds from ticket sales.
KATA Chief Executive Officer Jackline Kimetto in an interview claimed that there has been a lot of discomfort in the travel industry as the agents contemplate their next course of action.
Kimetto said levying services offered by travel agents has diluted local market competitiveness.