VAT INCREASED BY 2% IN KENYAN BUDGET 2006/2007

We have been generally advised that the rate of VAT (Value Added Tax) which applies to goods and services in Kenya has apparently been increased with immediate effect. This 2% increase will apply to all aspects of the hospitality industry and thus to MARA 2008 fees as invoiced to us by our ground operators and services in Kenya.

VAT generally is now 16% in Kenya. Previously, the hotel/lodge industry was levied 14% rather than the general 16% but this made up to 16% by the addition of a 2% 'catering levy'. While it is clear that applicable VAT is now increased by 2% to 16% there was no mention of the catering levy and no clarification as to if the 2% levy would be abolished. In this event the effective rate is now 18% rather than 16%.

Regardless, we will negotiate, if possible, a part responsibility in meeting this cost in an effort to avoid passing on the entire 2% increase. If the 2% increase is applied in full according to the formula "OLD RATE ÷ 1.26 X 1.28 = NEW RATE" then this would amount to $3.50 per person per day. The negotiated increase will need to be applied to the total fee for MARA 2008 and, consistent with the terms of the website, will be included at the time of final payment in 2008.