By Al-amani Mutarubukwa

Members of the private sector yesterday urged the government to take action to bring about business competitiveness, create a level playing field and expand the tax base.

They made the remarks during a Tanzania Private Sector Foundation (TPSF) meeting convened to compile suggestions that would be forwarded to the government for possible inclusion in the 2010/11 Budget.

The proposals come a few days after our sister paper, the Sunday Citizen, exclusively reported on government plans for the next budget, which has been tentatively pegged at Sh10.5 trillion.

Mzumbe University lecturer Honest Ngowi warned that the government was likely raise taxes or introduce new taxes to boost revenues ahead of the October General Election.

“The government should not do this because it would hamper the economy recovery process. Tanzania, like many other countries, is trying to shake off the effects of the global economic recession,” he said during the meeting, which also discussed reform proposals on taxation in the coming fiscal year.

Other speakers urged the government to reduce Value Added Tax (VAT) to 15 per cent from the current 18 per cent, saying it would stimulate the importation of more capital goods.

The Treasury has said the focus of the 2010/11 Budget would be to support implementation of the Kilimo Kwanza (Agriculture First) initiative and mitigate the impact of the global recession.

However, the chairman of the Agricultural Council of Tanzania (ACT), Mr Salum Shamte, said the government should reduce the five per cent tax levied on farmers to at least three per cent as was proposed last year, adding that such tax had been scrapped in a number of countries, including Zambia.

He also said the current VAT rate made Tanzanian agricultural products uncompetitive in East Africa.

For the Kilimo Kwanza initiative to succeed, the government should reduce tax on fuel to bring down production costs attributed to fuel from 60 per cent to 10 per cent, he said.

“This is because diesel is used by farmers in many activities such as tilling, irrigation, processing and transportation,” said Mr Shamte, who is also a sisal farmer.

He said land rent and import duty on irrigation equipment should be reduced or abolished to ease the burden on farmers.

Other stakeholders asked the government to reinstate the deemed capital goods tax exemption, saying its removal had affected investment inflows.

But the Treasury document seen by this paper indicates that the main focus of the next Budget will be on a few priority areas, which will help to accelerate economic growth and support the government’s thrust of Kilimo Kwanza with a view to reducing poverty.

The areas include agriculture, infrastructure and communication, energy, land management and manufacturing. The Treasury says other areas will be funded according to their priorities, which are expected to have multiplier effects on the economy such as research and development.

The criteria for selecting priorities also take into account areas that will provide opportunities for job creation. Other areas to be considered are those that will increase productivity across economic agents, widen the tax base, attract foreign direct investment and sustain macroeconomic gains.

TPSF board director Elvis Musiba said the government should reduce tax as fiscal incentives, and let businesses grow so as to widen the tax base and enable it to increase revenue collection.

“Taxation should not be used solely to boost government coffers…it should also be used as a tool to stimulate economic growth,” he said.

Mr Musiba cited the 10 per cent holding tax as a “huge disincentive” to investors, adding that the government should abolish it to promote investment.

Stakeholders also urged the government to address the problem of unpredictable business policies that kept potential investors away.

“Tanzania’s policies are unpredictable…they keep changing every year, and this is scaring away potential long-term investors,” Mr Musiba said.

They said there was also a need for a radical shift in the way the country treated foreign investors

“I have seen a lot of my friends who wanted to invest in Tanzania shy away after being ill-treated by government agencies,” said Mr Christopher Soper, chairman of Sollatek Electronics (K) Ltd.

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