Abstract:
This paper investigates the effects of tax incentives on investment growth in the tourism sector in less
developed countries, using Zimbabwe as the case study. The study was prompted by the realisation that
many less developed countries use tax incentives as means for luring investors into their countries yet
there is a general lack of analysis on whether such tax incentives have any impact on social and capital
growth. The study employed face-to-face and telephone interviews with key stakeholders in the tourism
sector that were selected through stratified and random sampling methods. Questionnaires, distributed
by hand, post and email were also used in situations where interviews were not feasible. Secondary
data was used as a bedrock for detailed analysis. The paper established that most policy makers indeed
use tax incentives to lure investors into the tourism industry but such policies are not followed by other
supportive policies in other areas of the economy that help boost investment in the tourism sector. Other
factors like corruption, transparency in government policies, length and cost of starting a business in
the country, for instance, are other important factors that need to be taken into consideration. Among
other recommendations there is a need for political stability, consistent and supportive policy, limited
government interference in the industry, decentralization and opening up of more local and foreign
tourism promotion centres, application of low tax rates across industries and the general creation of a
favourable environment for the effectiveness of tax incentives.
