It’s a recovery budget for Tanzania

Dodoma. The government yesterday unveiled a raft of measures that are meant to bring the economy back to cruising levels amid bruises occasioned by the Covid-19 pandemic and floods.

While maintaining the tempo of investing massively on mega infrastructure projects – which have defined the first five-year term of President John Magufuli’s administration - the government would also allocate more resources to rehabilitate roads, bridges, railways and other infrastructure damaged by floods as well on the fight against Covid-19.

“The year 2019/20 is ending with unexpected circumstances resulting from the destruction of transport infrastructure caused by heavy rains/floods across the country as well as the Covid-19 pandemic. The government is compelled to allocate more resources….Likewise, the government will allocate more resources to the health sector in order to fight against the Covid-19 and support other most affected sectors,” Finance and Planning Minister Philip Mpango told Parliament yesterday.

The winners

Requesting Parliament to endorse a Sh34.88 trillion budget for the government for the financial year 2020/21, Dr Mpango once again completely avoided the allure of raising excise duty rates on the ‘usual suspects’ (beer, spirits, cigarettes, wines, mineral water) in a deliberate effort by President John Magufuli’s administration to boost local production and contain inflation to single digit levels.

This, according to Dr Mpango was because companies’ operations had been affected by Covid-19.

Following a May 13, 2020 meeting of EAC Finance ministers, importation of raw materials that are used in the manufacturing of face masks, personal protective equipment (PPE) and hand sanitisers will now attract a zero percent import duty.

Similarly, electronic fiscal devices and point of sale machines will attract zero percent import duty.

In line with implementation of the government’s business environment improvement efforts, Dr Mpango announced the abolishment or reduction of sixty (60) fees and levies that were charged by Ministries Departments, Agencies and Regulatory Authorities.

“This is meant to improve the business environment, taking into consideration processes as well as the impact of Covid-19 pandemic,” he said.

Amid reports that some multinational tobacco buying firms were burdened by massive competition penalties by the Fair Competition Commission (FCC), Dr Mpango yesterday proposed to amend the FCC law with a view to ensuring that the fines charged are reasonable.

The amendment of Section 60 of the Fair Competition Act will bind multinationals to payment of penalties only based on gross revenue obtained only in Tanzania instead of global gross revenue. The measures also include reducing bureaucracy associated with registration of companies; reduction of import levy on industrial sugar; abolishing occupational safety and public health training fees. Inspection fees will also be abolished.

The government is also reducing accident investigation fees while several other reductions and abolishment of fees and charges apply to operations of fire and rescue force as well as operations associated with dealings in livestock and fisheries.

Low income earners will also have a reason to smile as Dr Mpango is raising the Pay As You Earn threshold from Sh170,000 to Sh270,000 so as to give employees some disposable income.

Savings groups will now only be required to pay income tax when their gross revenues exceed Sh100 million per year, up from Sh50 million.

“The aim is to give shareholders in Saccos [Savings and Credit Cooperative Society] a chance to share part of their incomes as dividends and through loans,” he said.

Though not in line with their usual proposal, employers will at least have a reason to smile as the government has finally cut Skills Development Levy from 4.5 percent of the payroll to four percent.

Airtel Tanzania and TTCL will now not be obligated to offload their shares through the Dar es Salaam Stock Exchange as the government amends the Electronic and Postal Communications Act, 2010 with a view to removing the requirements for companies in which the government owns over 25 percent of the shares to list on the stock market.

Losers

In the endeavour to ensure maximum and improve collection and proper utilization of government monies, a number of government agencies will come out as losers if the budget proposal gets approved with minimal alterations.

The losers would include Tanzania National Park Authority (Tanapa), Ngorongoro Conservation Area Authority (NCAA), and Tanzania Wildlife Management Authority (Tawa).

These would lose the mandate of collecting non-tax revenues accrued from the tourism sector as they used to do and that task will now be assigned to Tanzania Revenue Authority (TRA).

“In order to strengthen collection system of non-tax revenues from tourism and forest industry, I propose the collection of non-tax from these industries be managed by the Ministry of Finance and Planning through Tanzania Revenue Authority and be deposited in the Consolidated Fund,” Dr Mpango said.

All the non-tax revenue, collected from the sources, would be deposited in consolidated fund instead of the existing retention system.

The funds will then be disbursed to Tanapa, NCAA and Tawa through the government’s normal budgetary allocation system.

Owners of companies that operate under Special Economic Zones but who sell their products locally will no longer enjoy tax exemptions.

This is meant to create a level playing field among operators.

The government is also scrapping allowable deductions on contributions meant to support the government’s war against HIV/Aids and Covid-19.

Bank agents will now be required to pay a 10 percent withholding tax on the payments they receive for undertaking the agency tasks. This is meant to create a level playing field between them and their mobile money counterparts.

Multinational firms that dodge tax in some ways will now find the going tough as the government is amending its Income Tax law so it can be able to join a Global Forum on Transparency and Exchange of Information for Tax Purposes.

Similarly, Tanzania Investment Centre (TIC), Tanzania Fertilizer Regulatory Authority (TFRA), National Identification Authority and the Government Procurement Services Agency will now be required to issue the mandatory 15 percent revenue share to the government.

The Treasury Registrar (Powers and Functions) Act: Cap 370 will also be amended in order to empower the Treasury Registrar so he can collect 70 percent of excess funds held by any public entity. “This aims at increasing the control of public funds,” he said.

So far so good

With October General Election around the corner, Dr Mpango detailed a number of achievements that President Magufuli’s administration has registered during the past four years and seven months.

He said on average, the economy has been growing by 6.9 percent, fuelled by massive investment in mega infrastructure projects.

The country has $5.3 billion in foreign exchange reserves which is enough to cover 6.1 months of the import cover from 4.4 billion for 4.3 months as of 2015. He also detailed the achievements registered in construction of roads, bridges, education, health and water among others.

A total of Sh7.63 trillion was spent on construction of roads, bridges and pontoons during the five years of Dr Magufuli’s administration.