Tax relief for miners, brewers

Dodoma. Small scale miners, spirits producers and property owners will have a reason to smile after the government cut taxes they pay in amendments to various tax laws made by Parliament yesterday.

The Written Laws (Miscellaneous Amendments) No. 2 Act, 2019, tabled by Attorney General Adelardus Kilangi, the government removed the withholding tax of five per cent payable by small scale miners and zero-rating Value Added Tax (VAT) on supply of precious metal and gemstones by small miners at mineral and gemstone houses.

In the rare mid-year amendments, passed by Parliament yesterday after a brief debate by legislators, the government amended the Excise Management and Tariff Act so as to reduce the excise duty for spirits made of locally produced grapes from Sh3,315 to Sh450 per litre “to encourage manufacturers to use locally produced grapes to promote grape farming.”

An expert who spoke to The Citizen said the amendments were not common but were not very significant to alter the implementation of the current budget.

“Clearly, the amendments, specifically those to the Mining Act, are an implementation of resolutions of the stakeholders’ conference chaired by President John Magufuli last month. I’m aware a reduction in the Excise Duty for spirits is meant to make locally made spirits competitive,” the expert who spoke on condition of anonymity noted.

The amendments to the Mining Act further make it compulsory for traders to buy and sell minerals through Mineral and Gem Houses to be established countrywide.

Holders of mining licences and special mining licences will not be required to sell or buy minerals through Mineral and Gem Houses, according to the amendments. From now on tax relating to transfer of mineral rights will be paid before effecting the transfer, according to the AG.

“Furthermore, the amendments aim at regulating and controlling trading in minerals with a view to ensuring that revenue relating to trading in minerals are efficiently collected,” said Prof Kilangi.

The government has also sought to set a flat rate for property tax and enable the Tanzania Revenue Authority (TRA) to be the sole collector of property tax.

Prof Kilangi said, the proposed rates are Sh10,000 for ordinary buildings in rural and urban areas and Sh20,000 for each storey building situated in rural areas. For each storey building located in urban areas, one will have to pay some Sh50,000, according to Prof Kilangi.

Nzega lawmaker Hussein Bashe (CCM) commended the government’s initiatives, but challenged that more should be done to help grape producers.

“Reduction in excise duty on spirits it just addresses by 40 per cent the challenges that grape stakeholders are grappling with,” he noted.

Ndanda lawmaker Cecil Mwambe (Chadema) talked about preparation of regulations for the enforcement of the amendments. “There should be enough consultations to stakeholders during preparations of the regulations, to pave the way for win-win situation,” Mr Mwambe said.

Kawe legislator Halima Mdee (Chadema) also said; “We need to be consistent during preparations of our laws, to avoid frequent amendments.” Finance and Planning minister Philip Mpango said tax exemption on machines used in processing of minerals would be considered in next budget (2019/20).

Zero-rating Value Added Tax (VAT) on supply of precious metal and gemstones and removal of withholding tax would lead to a loss of some Sh741 million and Sh104 million in revenue respectively.

The government was likely to lose Sh5.7 billion following the reduction in excise duty on spirits.

But all the amendments in the Mining Act would translate into an increase of royalty paid to the government by Sh10 billion.

Reacting to the amendments, Speaker Job Ndugai said: “Sometimes it is better to set lower rates in order to make sure that many people pay taxes than to set high rates, which will see only few people pay taxes.”