An Investigation of the Effect of the Multiple Taxation on the Survival of the Small and Medium Tourism Business in Zanzibar

Abstract

The tourism industry is a vital economic driver in many regions, including Zanzibar. However, due to multiple taxation, Zanzibar's small and medium tourism enterprises (SMTEs) face challenges. These businesses, which dominate the local tourism industry, struggle with increased operational costs, reduced profit margins, and hindered growth due to various taxes and levies imposed by different government levels. This study investigates the effect of multiple taxation on the survival of SMTEs in Zanzibar. The research employs a mixed-methods approach, combining quantitative data analysis with qualitative insights from SMTEs. The quantitative analysis utilizes a dataset of 10 SMTEs, including hotels, tour operators, restaurants, and other tourism-related businesses. The dataset provides information on business types, years in operation, revenue, total tax amount, survival status, profit margins, loans, and tax rates. Qualitative data is gathered through interviews with SMTE owners and managers, providing contextual insights and personal experiences. Preliminary findings indicate that SMEs in Zanzibar face a significant burden of multiple taxations, with tax rates ranging from 19% to 30% of their annual revenue. Several businesses struggle to survive, with low-profit margins and high loan burdens. The qualitative data highlights specific challenges, including compliance costs, institutional conflicts, and the consequences of higher pricing on tourist demand and investment decisions. The research underscores the need for a more supportive regulatory and tax environment to foster the competitiveness and sustainability of these vital enterprises, which are crucial for economic development, employment generation, and sustainable tourism promotion in the region.