"The government policies have to be friendly for the development of this sector," said a tour operator, Ms Viola Mfuko, after a hastily convened meeting to discuss the crisis in Arusha on Friday.
She said tour operators and other players in the industry were already overburdened by a string of taxes, and that the proposed VAT would add salt to their injuries.
"Already we pay $2,000 each year for the Tala licence, which is very expensive. This business is proving to be very expensive for us," said the businesswoman who operates a tourist van company called Viola Car Hire.
Tour operators are already subjected to 32 different taxes, 12 in business registration and regulatory licence fees as well as 11 duties for each tourist vehicle per annum, and nine others.
Kenya learned the hard lesson in 2015 when it imposed VAT on tourist services. It rescinded its decision in its 2016/2017 budget, only or Tanzania to buy the same.
The neighbouring country's Treasury cabinet secretary Henry Rotich last week announced a number of tax measures to stimulate the industry.
Entry to national parks (park fees) is now VAT exempt and the same applies to commissions paid to tour operators.