Tourism has overtaken gold as Tanzania's leading foreign exchange earner.
The industry earned Tanzania $2.5 billion in the year ending January 2015, up from $1.89 billion in the year ending January 2014,
Stakeholders estimate that the country had received one million plus holidaymakers in the period under review.
BoT's February Monthly Economic Review indicates that gold exports value plunged from $1.64 billion to $1.31 billion in the period under review, as both export volume and price in the world market dropped.
Tanzania Association of Tour Operators (TATO)'s CEO, Sirili Akko says that Tanzania remains competitive, thanks to the state for holding back new taxes and fees.
"Besides political stability, Tanzania destination remains competitive as the government suspended implementation of new value added taxes and entry fees," says Mr Akko.Natural Resources and Tourism Minister, Lazaro Nyalandu shelved enforcement of new taxes and fees in a bid to make Tanzania a competitive tourist destination in Africa.
Specifically, he suspended an execution of national park's new entry fees as well as VAT on tourist guiding, game driving, water safaris, animal or bird watching, park fees, tourist charter services and ground transports.
Tanzania hopes the number of tourist arrivals will hit 1.2 million this year, up from one million visitors in 2014.
According to the five-year marketing blueprint rolled out in 2013, Tanzania anticipates to welcome two million tourists by the close of 2017, boosting the revenue from the current $2 billion to nearly $3.8 billion.
The World Bank says Tanzania can earn an average of $16 billion a year in the next decade if the government takes serious measures to reform the sector. That amount is nearly eight times the current tourism earnings.
The latest Tanzania Economic Update published by the World Bank says this strategic industry can grow and create more high-paying jobs, and closer linkages with businesses and local communities.
To realize this opportunity, the government should simplify its system of taxes and fees and make its revenue allocations more transparent.
"There is no doubt Tanzania is in a good place with tourism and yet could do considerably better," says Philippe Dongier, World Bank Country Director for Tanzania, Burundi and Uganda. "Tanzania has abundant natural tourism attractions and is well recognized internationally".
But there is potential for further growth as also emphasized by the government; and some of the needed reforms are quite urgent as the status quo could be costly for the country, Mr Dongier says.
Tourism directly employs close to half a million Tanzanians and contributes to almost 25 percent of total exports earnings.
It represents approximately 17.5 percent of Tanzania's total GDP but the level could be even more when considering its indirect impacts on other areas such as agriculture and transportation.
Tourism is considered to be of high priority under President Jakaya Kikwete's development agenda, as well as that of the National Business Council.
The industry's goal is to multiply by eight the revenues from tourism by 2025 or to double the sector's annual growth rate observed in recent years.
"This target is indeed achievable but only if there is a change in policies and mindsets among all stakeholders," says Jacques Morisset, World Bank Lead Economist who authors the report.
To increase tourism's benefits to the economy and the public, the latest Update proposes, three strategic directions.
The first is to diversify tourism activities from the current emphasis on high-end tourism in the north around Arusha and Zanzibar where up to 90 percent of tourism activities are currently concentrated.
The report recommends realizing other opportunities, especially in the South, and developing attractions and activities that cater to tourists on more modest travel budgets, including more local and regional visitors.
The second direction is to further integrate local communities and small operators into tourism activities, through benefit-sharing processes. While such efforts already exist in Tanzania, they are still at a small scale and have had limited impact on the ground.
The third direction requires revisiting the current complex system of taxes and fees, and the non-transparent use of revenues collected from tourism.
Tour operators are subjected to 23 different taxes, twelve being business registration and regulatory licenses fees as well as eleven duties for each tourist vehicle per annum.
The report done by Tanzania Confederation of Tourism (TCT) and BEST-AC, shows that average annual cost of personnel to complete regulatory paperwork per local tour operator is $1,795 per year.
Tanzania is home to nearly 1,050 tour companies, but official data shows that there are only 300 formal firms complying with tax regime.
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