EDITORIAL: Spread tax relief to all sectors of the economy - The Citizen

EDITORIAL: Spread tax relief to all sectors of the economy

Sunday May 12 2019

 

Among the more exciting developments from the ongoing Parliamentary budget session is the scrapping of 16 assorted charges, and reducing 23 fees, on investments in Tanzania’s pharmaceutical industry.

Announcing this in the National Assembly in Dodoma on May 7, this year, the minister for Health, Community Development, Gender, the Elderly and Children, Ms Ummy Mwalimu, said the relief measures will become effective in the next financial year (FY-2019/20) commencing on July 1, 2019.

The objective of scrapping the charges and reducing the fees is to attract functional investments in the country’s pharmaceutical and related sectors.

As the ministry’s name suggests, these include community development, gender, children and the elderly – in so far as they relate to general healthcare for all Tanzanians.

‘Investment’ entails putting good money, effort, time and other resources into ‘something’ with a view to getting ‘returns,’ usually financial gains. Generally, investors expect higher returns from riskier investments. The converse is usually true as well: low returns from low-risk investments. Investors can be very calculating by Nature, seeking to control situations in which they invest their money. And, they invariably are out to make mega-profits as much as possible under the prevailing circumstances.

More poignantly, potential investors are shrewd enough not to invest in countries with multiple and/or nuisance taxes; where the taxes are inordinately high, and/or the ease of doing business and other business-unfriendly regimes are the order of the day.

So, countries longing for investments must first and foremost create an investment/business-friendly environment which must clearly be seen by prospective investors as business-friendly.

President Magufuli on right path...

This is what the fifth-phase Tanzania government of President John Magufuli is now doing, starting with the crucial Health ministry, whereby, without a healthy population, there can never be a healthy economy. In the event, the government – working through its Health ministry – has abolished 16 charges levied on the healthcare-related pharmaceutical industry.

The charges include inspection fees for local pharmaceutical industries; new retail shops for food and veterinary medicines; medical representatives fees; retention fees for domestic pharmaceutical products; export permits fee; drugs and cosmetics raw material imports and for marketing fees.

On the other hand, the government cut down 23 fees which were payable to the Tanzania Food and Drugs Authority and the Chief Government Chemist for the same noble reason: to create an investor/business-friendly environment in the pharmaceutical industry. In this regard, it reduced – albeit marginally in some cases – the fees on the registration of locally-produced medicinal drugs, and on processed cereal-based food for children.

Fair enough.

But, a country such as Tanzania has more to it than just Health, Community Development, Gender, the Elderly and Children as segments of its struggling economy. Tanzania is infamous for its multiplicity of taxes and inordinately high tax rates, both major disincentives to investing. We, therefore, urge the government to extend its tax abolition and reduction measures to other sectors of the economy for the very same reason: to encourage and attract investors as a matter of course.