ECONOMICS MADE SIMPLE: Understanding the Finance Bill, 2017 after national budget

 A follow up of budget discussions in Tanzania for many people arguably stops after the minister of Finance and Planning reads the national budget. For the 2017/18 fiscal year, this was done on June 6. It is important to understand that a budget is a long process and not an event. The reading of the national budget by the minister comes after sectoral budget presentations by sector ministers and discussions of the same by parliamentarians. All budgets are based on annual budget guidance for the year in question. This in turn is based on an annual plan, which is derived from the Five Years Development Plan (FYDP). The FYDP in turn is extracted from a range of 15-year plan. These are tools of implementing the National Vision, 2025.

Arguably, a few people follow up the remaining part of budgeting process after the minister reads the national budget. Among the key steps that should be equally followed is the Finance Bill and the Finance Act that follows it.

The national budget gives an overview of a number of issues pertaining to government revenue and expenditure for a given fiscal year. As the saying goes, devils of the budget may lie in the details given in the Finance Bill and the Finance Act. This is partly why it is important for all budget stakeholders to equally follow up the Bill and the Act.   

On the Finance Bill

As part of the budget process, the government submits to the Parliament a Finance Bill normally discussed by the Parliament and what is agreed and endorsed by the majority turns out to be the Finance Act for the fiscal year in question. The Finance Act gives the budget the needed legal power and legitimacy for implementation.

 The Bill outlines areas, where the government is proposing changes with regard to the budget in general and its revenue side in particular. Inter alia, it may propose changes on types and rates of taxes, fees, charges or fines. It also proposes areas of improvement in various laws related to collection and expenditure of government revenues both tax and non-tax.

The Finance Bill, 2017

Looking at the Finance Bill, one sees some of the key aspects of a typical Finance bill. It is important for budget stakeholders to understand some of the general and specific contents of the Bill. This is because the Act derived from the Bill will guide the implementation of the budget which in turn will affect everyone in direct and indirect ways.

Contents of the Bill, 2017

The Bill, 2017 has several key contexts that are partly outlined here. It proposes changes in excise duty and income tax laws. It also proposes changes in Local Government Authorities (LGAs) Finance Act of 1982. Inter alia, these changes in the LGA Finance Act will give the Tanzania Revenue Authority (TRA) power to collect billboard fees in the whole country.

The Bill came with changes in the Minerals Act by introducing a one-per cent inspection fee on the value of minerals destined for export. Another change brought by the Bill is change in laws related to finances of ministries, departments and agencies (MDAs).

In the new regime, MDAs will be required to use a special government system to collect all revenues. The aim is to prevent leakages of government revenues and improve collection of non tax revenues. This source of government revenue has not been performing well in absolute terms and in relation to tax revenues in particular.

Other changes in 2017

The Bill brought with it changes with regard to information for TRA in court matters with the effect that only TRA officials with competent authority will share such information. Another change is one that will see those late in paying taxes be fined and pay interest. The aim is to improve voluntary compliance. Furthermore, the Bill brought changes that will give TRA powers to investigate and inspect tax related offences.  Based on the Bill, the property tax law will give the minister of Finance and Planning powers to collect property tax in all urban authorities. Arguably thanks to lobbying by stakeholders, the Bill also removed the Value Added Tax (VAT) on ancillary services that was introduced in the 2016/17 fiscal year.

 Finance Act 2017

Following the endorsement of the Finance Bill, what was endorsed turned out to be the Finance Act, 2017. This is the Act that will be used in 2017/18. Tax, fees and charges as well as their rates that were approved are the once in force with effect from July 1. This is the same effective date for the changed laws based on the Bill. It is very important for all stakeholders to familiarise themselves with it in general and its specific parts that are of direct relevance to them.