The Gambian Tourist Value Chain and Prospects for Pro-Poor Tourism

Tourism in The Gambia: International ‘Best Practice’ in Poverty Reduction & Pro-Poor Growth Through Tourism
Draft Report (Friday 22 nd December 2006)
What this analysis excludes, however, is tourist tipping of hotel staff – which managers
estimated at up to 100% of the wage for front-of-house staff. This represents another
example of the impact of discretionary tourist spending impacting directly on poor people.
Generous tipping may also explain why non-managerial hotel staff still work for rates that
are about half the rate in the informal sector – which is an unusual pattern.
To put these employment figures into context, in 1998 there were 37,460 formal sector
jobs in The Gambian labour market – 15,429 in the public sector and 22,032 in the private
sector 27 . This suggests that people working directly in tourism constitute almost one-fifth of
the private sector formal sector jobs in the Country and hotel workers alone constitute over
12% of private sector employment.
There are four key ways in which the linkage between the tourist accommodation sector
and the poor could be increased: increasing the tax take from the accommodation sector;
reducing seasonality of tourist demand; increasing wages for workers; and the
‘Gambianisation’ of hotel management.
First, there is evidence of rather lax tax morality in the tourist accommodation sector in
The Gambia. Our hotel survey estimates a gross annual surplus of about £10.8m (D600m)
being generated by hotels which should be generating an annual tax take for government of
about £3.7m or D210m – on the basis of the Income Tax Act stipulation of corporate tax
levied at 35% of profit. With a strongly redistributive Budget, these funds could have an
important impact on poverty in The Gambia. In reality, however, the Master Plan estimates
the annual tax take from the tourist sector is only about £0.8m (D50m) – which implies tax
morality of only about 24%.
Box 2: Pro-Poor Tourism Regulatory Issue # 1
An important role of the state is to redistribute resources from profitable enterprise to the
poor. There is evidence that the Income Tax Act is only generating about one-quarter of the
total potential tax take. An important mechanism by which resources should be being
transferred from the tourist sector to the poor is currently operating ineffectively and tax
morality should be improved.
Improving tax morality is a difficult and long-term aim – it has, for instance, taken the
democratic government in South Africa a decade to raise tax morality from an estimated
35% to 70%. It also needs to be achieved with a mixture of ‘carrots’ (e.g. amnesties on
unpaid tax which is declared and reducing tax rates as payment rates increase) and ‘sticks’
(more effective enforcement of tax legislation).
There is also a need to demonstrate to hoteliers some link between taxes paid and benefits
received. A good illustration of bad practice in this respect is currently observed with
municipal taxes in the Tourism Development Area (TDA). On the one hand, municipal taxes
are being levied on hotels and on the other municipalities are failing to perform even the
most basic service delivery – such as solid waste disposal. This non-delivery has become so
serious that the GTA is sometimes compelled to deliver services itself.
Box 3: Pro-Poor Tourism Regulatory Issue # 2
Tax morality is unlikely to increase if the tourist sector is perceived as a ‘cash cow’ from
which resources can be extracted without any return. Hotel managers in the TDA are
currently being presented with local government tax bills with very low and sporadic levels of
basic municipal service delivery. The delivery of services to support the tourism sector should
be an important priority and a delivery mechanism streamlined.
27 EMG (2005) Gambia Tourism Development Master Plan Technical Report No.1 The Economic Impact of
Tourism
34