This study assesses the effect of VAT on the tourism demand in Tanzania (the likelihood of a tourist to visit). The study aimed to get the opinions of both the tourists and tour operators basing on the introduction of the 18 percent VAT on tourism services and examine effect of VAT and other related factors on tourism demand in Tanzania. To achieve prompt results, a mixed methodology was employed using both quantitative and qualitative data in order to gather accurate and reliable information. Descriptive research design was employed, as it explains the cause effect relationship between variables. Questionnaires, interviews and observation methods were employed to collect data from 110 respondents, who were selected by using both simple random sampling and purposive sampling techniques. Findings from this study revealed that, 83 percent of the respondents were affected by the high prices charged on the tourism services like transport, accommodation and meals, while 17 percent of the respondents viewed prices on the tourism services as cheap. 95 of the respondents saw the 18 percent VAT on tourism services as high and 5 percent of the respondents saw, the 18 percent value added tax as low. This implies that, a considerable number of visitors are being sensitive to VAT imposed on tourism services. 90 percent of the respondents were comfortable with the infrastructure in Tanzania to different areas of interest like National parks and game reserves, while only 10 percent of the respondents were not pleased by the infrastructure.69 percent of the total population was attracted to visit Tanzania due to the peace and security status in the country and 31 percent of the total population visit Tanzania not because of peace and security. Moreover, 97 percent of the total population visited the country because of the environmental conservation and fighting against poaching efforts, while 3 percent of the total population visited the country not because of the environmental conservation policies and fighting against poaching efforts in Tanzania. Results from the logistic regression model showed that Education, Price opinion, VAT, infrastructure, peace and security and destination marketing had a significant effect on determining the likelihood of a tourist to visit the country. Recommendations and policy implication were provided.

A Dissertation Submitted in Partial Fulfillment of the Requirements for Award of the Master of Science in Applied Economics (MSc-AEB) Of Mzumbe University.