200 tourist hotels up in arms over hefty city service levy

 

By By Bernard James The Citizen Reporter

Posted  Sunday, April 5  2015 

In Summary

 The hotel operators contend that the levy will infringe on their basic human and fundamental rights, which are guaranteed by the constitution.

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Dar es Salaam. More than 200 tourist hotels have petitioned the High Court to stop local governments charging the city service levy, which is said to have had a devastating effect on their business.

Crying foul over the levy which, they argue, has been imposed contrary to the constitution, the hotels have asked the court to declare the tax unlawful and direct municipalities and city authorities to stop collecting it.

The Hotels Association of Tanzania (HAT), says it has gone to court as a last resort after several attempts to resolve the longstanding tariff dispute failed.

Municipalities and city authorities have come up with by-laws requiring local tourist hotels and tented camps to pay 0.3 per cent of their quarterly sales as service levy.

They argue that they are just living up to the spirit of the Local Government Finance Act 2003, which empowers them to make laws and impose levies in order to raise funds for maintenance of infrastructure and finance social projects.

This means that local companies will pay the fee every March, June, September and December.

In its petition, though, HAT argues that tourist hotels and tented camps do not have to pay the levy. Justices Lawrence Kaduri, Sakieti Kihiyo and Richard Mziray are hearing the petition. The hotel operators contend that the levy will infringe on their basic human and fundamental rights, which are guaranteed by the constitution.

They cite article 138 of the constitution, which prohibits governments from imposing and collecting any form of tax without an express provision of the law.

And they have accused some local government authorities of carrying on with “business as usual” despite the fact that the law is clear on the matter. The Attorney General has asked the court to dismiss the petition on the grounds that it is legally incompetent because it was filed under wrong part of the law.

Attempts to resolve the tariff row has not worked in the interests of the hoteliers. In July last year, HAT wrote to the Prime Minister’s Office seeking clarification on the disputed levy.

It also asked the PM’s office, which supervises all local governments, to direct the authorities to stop the levy.

But their request hit a snag. The PMO’s office responded four months later telling the petitioners that hotels are no longer exempt from paying service levy.

The PM contends in his response that Section 35 of the Finance Act 2003, which grants exemption from paying service levy to hotels, has been repealed by Sections 35 and 36 of the Finance Act of 2012.

But the petitioners argue that the PMO’s interpretation is wrong in law.

According to HAT, continuing with the service levy in tourist hotels is against the constitution and Local Government Finance Act.

Ilala Municipal Council’s letter to Serena Hotels demanding settlement of an outstanding Sh64 million in city service levy for six-and-half months is part of the petition.

In a reminder dated 28 January, the municipal director threatens stern action against the hotel if it fails to pay up within seven days. The court will on 13 April hear the AG’s arguments on why he wants the petition dismissed.