… Executives to demand 3% VAT flat rate
By Sheila WILLIAMS
Tourism in Ghana has become a major socio-economic activity and one of the most important and fastest growing sectors of the Ghanaian economy.
It is the fourth largest foreign exchange earner in the national economy. Providing direct and indirect number of jobs in the country.
The new President of the Ghana Hotel Association, Dr. Edward Ackah-Nyamike, says he and his team have, as their vision for the next four years, four pillars: resourcing the Association in terms of funding, the proper structuring of the organizational structure of the Association, improving benefits for individual members and engaging with government on the regulatory framework.
In an extensive interview, Dr. Ackah-Nyamike fielded questions from Business Day, walking us through how he and his team would give a facelift to the hotels industry and restore fortunes.
Resourcing the Association
According to the president, the association is unable to carry out a lot of projects because of poor funding base. Indeed, the Association has not been able to get reliable sources of funding.
Nonetheless, there is the possibility to do more business, source part of the 1% Tourism levy, re-energise membership drive because as at December 2017 the number of members in good standing was just a small fraction.
Apart from that, “we have a lot of organizations that the Association do business with in terms of supply. The association would find ways to do more business with such companies for mutual benefit from it,” the association’s president told Business Day.
Properly organising the structures
The Ghana Hotel Association has 11 administrative regions or branches; 10 of these are structured in tandem with the administrative structure of the country while Tema is created as an 11th region.
Dr. Ackah-Nyamike says: “I think we can do more than we have done so far in terms of supporting the regional branches to perform well.”
He places emphasis on the fact that the Association needs to have proper structures to coordinate its various activities, especially building the activities of the regions into the national calendar rather than letting each have their own isolated calendar of operations. “There should be a bigger picture from the National Office to coordinate and monitor all programs in the regions. This will enhance unity and uniformity in the industry.”
Benefits for members
The third pillar of Dr. Ackah-Nyamike’s administration is to engender satisfaction among members.
Obviously, having a well-structured association is a bit different from members who are satisfied with the benefits they derive from the association. Hence, this leadership is looking at various interventions to support members of the association. “We have hotels that are struggling. The question is: Why are they struggling? What are the issues they are facing? Are there ways that the Association can intervene in their businesses to support them to operate better in terms of training and capacity building, alternative uses of energy? Are there ways to support members with solar energy to reduce their cost of operation?
Addressing some of these issues will obviously lead to satisfaction for the individual members.
Re-examining relationship with regulatory bodies
On this fourth pillar, Dr. Ackah-Nyamike opens the conversation this way: “The hotel industry is just like any other business; we perform better when the economic environment is conducive for business.”
Consequently, the association wants to have good standing relationship with regulatory bodies including the Ghana National Fire Service, the Food and Drugs Authority, Ghana Revenue Authority, Environmental Protection Authority, and all other bodies that regulate the activities of the Association.
A thorny issue has always been the increment of the regulatory bodies’ licence fees. Therefore, the association would love to be part of the discussion “because we are stakeholders, we are in partnership.”
It will also want to deal with issues like taxes, including the Value Added Tax.
These four pillars of the vision would be executed simultaneously in order to create a better enabling environment for the hotel industry to flourish.
In relation to this, the Association intends to take on the matter of out-dated laws and policies. Thus, executives would be working on the abolition of laws relating to the hotel industry which have become outmoded and a drawback on the development and growth of the hospitality industry and its players.”
“These outmoded laws drive investors away and makes the country lose revenue,” Dr. Ackah-Nyamike contends.
Royalties, taxes and patronage: the killer pills
Away from these four issues, the conversation also delved into the key issues threatening to extinct the hotel industry.
Dr. Ackah-Nyamike began his list with the mention of royalties, which hotels are mandated to pay to two bodies – the Ghana Music Right Organization (GAMRO) and the Audio-visual Right Association of Ghana.
“Members would love to pay, but what is the scientific basis of the royalties that members pay?” Dr. Ackah-Nyamike inquires. “We need to seek answers to that. GAMRO wants to charge 5-star hotels GHC19,000, GHC15,000 or GHC12,000. What is the basis for that charge per year? The association’s members would love to know.”
Apart from that, there is a concern about taxes. Dr. Ackah-Nyamike explains that this concern arises because “the system has grouped all hotels together as one; the one star, two star and even the five star hotels [are considered] as one…”
Therefore, the association would be calling for a 3% VAT flat rate across board for all hotels. When such proposal is accepted it would do a lot of good to the economy than the current situation where members try to dodge the payment of VAT at 17.5% rate.
Low patronage is the third killer pill. Patronage of hotels depends on money for leisure. Equally, the size of conference rooms, roads, security issues, and high utility rates all make up hotels very flexible and attractive for patronage.
In spite of its myriad challenges, the hotel business can be very lucrative with the right skillset. Well-trained staff can render best customer handling to boost business activities and increase profit margins.
Visitor arrivals
Hotels are doing 30%, 40% of occupancy rate monthly. There is an increasing trend of individuals, building houses or rooms to house foreigners at a cheaper fee, thereby taking them away from hotels.
Dr. Ackah-Nyamike argues that “Those practising these in the system do not pay taxes, they are not licensed, and they are not regulated.”
Expectation from Ghana
Regardless of the industry’s challenges, Dr. Ackah-Nyamike advises, all hoteliers should pay their various taxes while discussions around reforms continue. “It would be unrealistic to say that we don’t want to be taxed, No, if we did not want to pay tax, there would be no money to improve airport, roads, tourism sites, and the building of basic infrastructure for tourism.
“But it is important that tourism is not unduly or unfairly tax and levied,” he concluded.
