Mixed views as economists analyse Samia’s maiden budget

Dar es Salaam. Economists yesterday gave mixed opinions, commending some budgetary measures, while criticising others.

Repoa’s executive director Donald Mmari, and its senior researcher Abel Kinyondo; State University of Zanzibar (Suza) lecturer Haji Semboja and University of Iringa (UoI) lecturer Enock Wiketye separately reacted differently to the budget.

The economists were commenting on the Sh36.3 trillion 2021/22 budget tabled in Parliament on Thursday by Finance and Planning minister Mwigulu Nchemba.

They focused on areas of taxation policy, positive and negative areas, corrections needed and realization of the 5.6 percent target of economic growth.

Speaking to The Citizen, Dr Mmari said the budget took into account impacts of Covid-19 on trade, businesses and investment; reduced costs to locally produced goods and increased tax on imports in order to increase competition, create jobs and improve revenue collections.

“The government has explained the progress of securing Rapid Credit Facility (RCF) from the United Nations institutions in order to stimulate economic growth in Covid-19 affected areas,” he said.

He said reducing the percentage of Pay-As-You-Earn (Paye) will increase money circulation, consumption and therefore improve government revenues. He said the 5.6 percent target will only be realized upon control of Covid-19 and reducing its impacts in the tourism and other sectors. “Increasing Sh100 per litre on fuel levy will not hurt citizens as compared to poorly developed infrastructure that could prevent easy access to markets and social services,” he said.

According to him, transporters will be relieved from higher costs of vehicle maintenance and reduce time to reach the final destination, commending government measures aimed at improving rural roads.

“However, instead of reducing fines imposed on bodaboda and bajaj taxi drivers for road traffic offences, they were supposed to increase it because the move could lead to increased accidents,” he noted.

Furthermore, he suggested formalization of small scale businesses and reduction of tax burden to traditional taxpayers should be effected to increase the tax base.

He was supported by Dr Kinyondo who said despite the positive measures made in different areas, introduction of tax measures to telecommunication services was regressive and could impact the economy.

“Tax is always increased on luxury goods, telecommunications services are not. Highly dependent on citizens for money transfer services, making payments and getting insurance services, introducing blankets could kill the economy,” he said.

He said the introduction of property tax on the electricity’s Pay-As-You-Use (Luku) prepaid system would force tenants to pay the tax instead of landlords.

However, the system will not easily recognize the type of house referred (ordinary or storey) and that absence of the policy on buildings unconnected to the Tanzania Electric Supply Company (Tanesco) will bring more problems, according to him.

“Reduction of bodaboda and bajaj fines from Sh30,000 to Sh10,00 and allowances approval to Local Government officials has been politically motivated because they are not recognized by the law. Those recognized (public servants) have been asked to wait for the economy to stabilise,” he argued.

“We are supposed to formalize informalities, provide IDs to petty traders to broaden the tax base. Instead of adding tax burden to ordinary taxpayers, small scale traders possessing stalls should be given Taxpayer Identification Numbers (TIN),” he said. Prof Haji Semboja said the budget aims at mobilizing resources for implementation of infrastructure projects, noting that although Tanzanians will bear the pains now, more jobs will be created in the future, tax reduced and government revenue increased.

“The focus now should be increasing non-tax revenue by increasing competitiveness of businesses like Air Tanzania Company Ltd (ATCL) and the Tanzania Telecommunications Corporation Ltd (TTCL),” said Prof Semboja.

Regarding the 5.6 percent target economic growth, he said 8-to-10 percent growth had to be the target.

For his part, Prof Wiketye said it was illogical to reduce bodaboda and bajaj fines, while increasing tax on tyres, suggesting that increasing efficiency in agriculture, industrial and social services had to be the focus.

“Despite the good plans, realization of the 5.6 percent growth will depend on impacts of external factors like Covid-19,” he said.