Dar es Salaam. With the clock ticking away towards the presentation of President Samia Suluhu Hassan’s maiden government budget in Parliament afternoon today, expectations are high that the government will come up with a plan that bolsters economic growth after some bruises caused by the Covid-19 pandemic.
Key on the agenda of economists, bankers, members of the business community and ordinary citizens is how to boost the competitiveness of locally-produced goods, and raise liquidity in the economy.
With President Hassan’s pro-business sentiments, hopes are high that the Finance and Planning minister, Dr Mwigulu Nchemba, will present a budget that aims at bolstering economic activities.
It is the hope of members of Tanzania Private Sector Foundation (TPSF) that in his maiden budget, the new Finance minister will come up with ways of expanding the tax base through revamping key productive sectors such as agriculture, livestock and fisheries, manufacturing and tourism.
“We expect major efforts to be accorded to those sectors that provide huge employment opportunities to the existing workforce but also use domestic raw materials for value addition juts as it has been suggested on several occasions by President Hassan,” the TPSF director of policy, Mr Andrew Mahiga, told The Citizen yesterday.
The TPSF, according to him, foresees improvements of the business and investment climate through the adoption of a fiscal regime that will lower production costs and raise the competitiveness of locally-produced goods and services.
Apart from discouraging the exportation of raw materials, TPSF believes special budgetary measures will also be put in place to address the Covid-19 related challenges facing operators in the tourism and hospitality sectors.
To boost liquidity and stimulate economic activities, the government will have to allocate enough funds for payment of arrears to its suppliers. Refunds of Value Added Tax (VAT) and additional import duty on industrial sugar as well as must be done as a matter of urgency.
In an effort to improve the business environment, Dr Nchemba will also have to come up with measures that seek to expedite the implementation of the blueprint for improvement of the business climate through making regulatory reforms, targeting primarily the agricultural and manufacturing sectors.
“As for the 2020/21, a total of over 263 levies and fees have been reformed by the government and therefore we expect more of such reforms to be implemented so as to reduce the cost of doing business, lower production costs and enhance domestic industries’ competitiveness,” he said.
Manufacturers are also hopeful that, during the budget that will be tabled for debate in the House today, the government will improve competitiveness of the productive sectors through Customs-related measures which include granting duty remissions to manufacturers, and re-considering application of the existing EAC Common External Tariffs (CETs) with a focus on protecting domestic industries against foreign competition - and also promote local value addition. Others include provision of VAT and import duty exemptions for importers engaged in agricultural activities and manufacturers of industrial goods.
They are also proposing a reduction of the Skills Development Levy (SDL) from 4.0 percent to 3.0 percent.
“This would reduce tax burden to employers while promoting competitiveness of domestic industries and offer more employment creation,” says the Confederation of Tanzania Industries in its proposals to the taskforce on tax reforms.
For businesswomen, an improvement in road infrastructures, access to water, health facilities and agricultural inputs will make them proper.
This, according to the Tanzania Women Chamber of Commerce (TWCC), was because a majority of women were engaging in agricultural activities and therefore an improvement in the sector was a boon to their businesses.
“We expect to see more funds in road infrastructures, particularly in rural areas, for farmers to transport their agricultural products to the markets. We also want to see improvements on legal and tax procedures on importation of agriculture equipment and value addition machines,” said the TWCC executive director, Ms Mwajuma Hamza.
Access to water and health facilities will relive women entrepreneurs the hassle of spending a good chunk of their time searching for such services.
For the pharmaceutical industry, the tax rates could also be reviewed to make them competitive.
Speaking during a meeting that was coordinated by Tanzania National Business Council (TNBC) in Dar es Salaam last week, Mr Mansoor Daya who is chief executive officer for a pharmaceutical factory, Mansoor Daya Chemicals Ltd, said high tax rates were a burden that reduced their effectiveness against foreign manufacturers.
“In the pharmaceutical industry main issues include heavy taxes that are imposed to local industries compared to the foreigners, this affects profitability and our capacity to export,” he said.
The stakeholders, under the stewardship of a senior Economist consultant Prof Samwel Wangwe, also did a regulatory impact assessment study where they suggested some changes in the authorities to ease business sector performance.
Prof Wangwe said some of the regulatory issues that arise in the business sector include tight laws, restrictions and conflicts of interests by some government institutions.
“The government should also review some regulatory issues to make sure they align with the mission to promote domestic industries,” he said. For the telecommunication sector, the hope is that the government will reduce the current 17 percent charge on mobile services.
This, they hope, will would among others things, lead to expansion of the size of the national economy by $438 million (nearly Sh1.02 trillion).
The move would also increase government revenue by about $58 million (Sh134.5 billion) per annum, five years after the tax reform.
Global mobile industry lobby GSMA says other deliverables could be 1.6 million new mobile internet users in rural areas and an additional Sh71,700 in rural household consumption per month.
Fiscal experts say reduction of excise duty of 10 percent on mobile money to five percent will make them more affordable and consequently increase financial inclusion.
Gracing the meeting however, the Permanent Secretary in the Ministry of Industry and Trade Mr Dotto James, said President Hassan’s administration had resolved to solve the hurdles beclouding Tanzania’s business environment to boost the competitiveness of the country’s products in regional and global level.
He said after receiving concerns from the business community the issues will be presented to the President and the government will eventually set a strategic plan to address the challenges.
“The government will start reviewing its policies such as in the discussed issues of taxation, technology, and also improve other non-fiscal incentives so as to boost competitiveness of domestic industry,” he said.
It is basing on President Hassan’s assertions on improving the business climate that Tanzania Bankers Association (TBA) sees the future as promising.
“The government’s push on agriculture reforms - coupled with President Hassan’s promise to empower women, as well as future prospects for government plans to continue with all major infrastructural projects - all augur well for the banking sector,” the TBA chairman, Mr Abdulmajid Nsekela, said yesterday.