Government unveils Budget as it targets growth

The proposed ShSh44.4 trillion is 7.07 percent or Sh2.9 trillion more than the Sh41.48 trillion budget that the Parliament approved for for the financial year 2022/23.

Read: Tanzania's government debt rises by Sh10 trillion

“The amendments are expected to answer the questions and satisfy the thirst of the Tanzanian society, aiming to stimulate various economic activities in the country by placing emphasis on strategic sectors such as industry, agriculture, livestock farming and fishing, electricity infrastructure, transportation and social sectors…,” he said.

Cognizance of the fact that Tanzania, just like its regional peers and elsewhere in the world, were grappling with spiralling cost of living due to the global Covid-19 pandemic and a disruption of supply chains emanating from the ongoing war in Ukraine, Dr Nchemba said the government’s focus for the next fiscal year would be to accelerate recovery of the economy and enhance productive sectors for improved livelihood.

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In a clear indication that the government was increasingly becoming investor-friendly and keen at supporting enterprises, Dr Nchemba proposes to amend Section 86 (1) of the Tax Administration Act, CAP 438 to lower the level of the penalty charged for the offence of not issuing receipts or not using electronic machines (EFD) starting from Sh4.5 million to Sh3 million.

“The relevant rates were set with the aim of encouraging compliance with the requirements of the existing tax laws. However, it has been found that high levels of punishment encourage the environment of corruption,” he said.

In what sounds like a deliberate move to respond to recent complaints by traders who decided to close their shops in protest at the bust Kariakoo area, Dr Nchemba is recommending a review of all the Laws and Regulations that impose penalties in order to lower those rates. In an effort to enhance administrative efficiency and promote voluntary tax compliance, the Value Added Tax registration threshold is now raised from Sh100 million to Sh200 million.

The Immigration Act, CAP 54 is to be amended to allow issuance of a residence permit (Residence Permit Class B) to any investor who is not a resident in this country but will invest to buy a house with a capital of not less than $150,000 in the country. The Residence Permit, Dr Nchemba said, will be issued after the authorities responsible for investment in collaboration with the Minister responsible for housing are satisfied the relevant capital has come from abroad. The measure is intended to attract investment in the country and increase foreign exchange.

The government’s regulatory bodies – which have repeatedly blamed for raising costs of doing business – will now have to start using a Single Window Payment System for collection of fees, levies and penalties and establish inspection procedures to facilitate business without affecting their core functions, Dr Nchemba proposed.

This, he said, was in the view that regulatory institutions tend to charge high penalties which provide room for negotiations between government officials and businessmen, thereby creating corruption loopholes. Players in the aviation sector could have a reason to celebrate as Dr Nchemba proposes value added tax (VAT) exemption on sale and lease of aircraft, aircraft engine or parts by a local operator of air transportation.

The measure, he said, intends to support the growth of the aviation sector and reduce business and investment cost.

The government is also proposing the VAT exemption on inputs used to manufacture insecticides and acaricides in an effort to provide relief to local manufacturers and protect domestic industries.

Dr Nchemba also proposed the exemption of the VAT on supply of precious metals, gemstones and other precious stones at buying centres, mineral markets and Gem houses designated by the Mining Commission under the Mining Act or refinery situated in Mainland Tanzania. The aim is to attract sales of minerals at mineral trading hubs and increase the contribution of Mining Sector to the GDP, which currently stands at 9.7 percent.

The government has also proposed amendment of Section 11 of the VAT Act to include domestically manufactured capital goods in the list of capital goods that qualify for deferment.

In an effort to provide relief to local manufacturers of pharmaceutical packaging and enhance their competitiveness in the market, Dr Nchemba also proposed the amendment of the VAT Act, CAP 148 to exempt inputs used to manufacture packaging materials.

The minister also proposed for a zero rate VAT on textiles products manufactured using domestically produced cotton and fertiliser manufactured locally for a period of one year.

Losers

The budget presented yesterday, will have several losers as well who include artisanal miners who will now have to pay an income tax of two percent as the government seeks to enhance equity principle of taxation by including them in the tax net and ensuring that they pay taxes on the income that they earn.

He also proposed an excise duty rate of 20 percent on beer and tobacco products.

“This measure is intended to restore the parity of relative prices and safeguard real value of government revenue since specific rates tend to lose value if they remain unchanged and hence the real value of collection is lost,” he said.

Those building houses will now have to pay Sh1000 on every 50-kilogram bag of cement as the government proposes the introduction of an excise duty of Sh20 per kilogram of imported and domestically manufactured cement.

Again, the government proposed the introduction of an excise duty rate of Sh80 per litre on petroleum oils and oils obtained from bituminous minerals, to hence measure equity in taxation.

The government is also planning to introduce excise duty at the rate of 30 percent on other cigars, cheroots, cigarillos and cigarettes.

On top of that the government wants to introduce excise duty at the rate of 20 percent on imported and domestically manufactured gambling machines.

Where the money comes from

In an nustshell out of the Sh44.4 trillion budget for the financial year 2023/24, Sh30.237 trillion will sourced internally.

Out of the funds to be sourced locally, Tanzania Revenue Authority will collect Sh26.725 trillion while the remaining will be sourced as non-tax revenue.

District, town and city councils will garner Sh1.144 trillion. The government will also source Sh5.466 trillion as grants and concessional loans from development partners while another Sh7.541 trillion will be sourced as loans on commercial terms.