Lorry owners aggrieved at new advance tax law

Dar es Salaam. Road transporters have requested that the government amend the Finance Act because they claim it increased their tax burden.

The law requires the passenger or cargo transporters to pay an advance tax of between Sh180,000 and Sh2.79 million per truck per year, depending on the carrying capacity of the vehicle.

Tanzania Truck Owners Association (Tatoa) said the fixed tax is a burden to them considering that it is charged even before they make profits. According to a press release issued by Tatoa, the tax disregards the taxation principle of charging actual profit rather than assets owned.

The Tanzanian transporters said the tax puts them at a competitive disadvantage against foreign transporters who do not have such cost structures.

“The law therefore opens doors to foreign transporters who will stand to benefit from transit cargo through our port which Tanzanian transporters will no longer be participating in carrying due to viability issues,” the association stated.

“Enforcing this law will undoubtedly push a lot of transporters out of business as they will be unable to afford the advance tax and hence negatively impact the logistics sector due to lack lorries or even be a trigger for inflation if transporters are forced to hike their prices to ensure business sustainability,” the association said.

Commenting on the matter, the head of communications at the ministry of Finance and Planning, Mr Ben Mwaipaja, told The Citizen yesterday that there will be a tax-related meeting scheduled for Wednesday (today), that will involve all sectors to discuss tax issues and other challenges.

“All stakeholders are invited to attend so that they can express their views on tax issues, including these stakeholders in the transport sector. They will also have the opportunity to express their views because the amendment of law is mostly done during the budget,” he noted.

The association, which comprises over 1,000 members owning a combined fleet of over 25,000 lorries, called on the government to review the law to incorporate opinions and suggestions made during the pre-budget proposals.

According to the statement, the stakeholders had proposed tax reforms which intended to introduce a fixed presumptive tax for transporters with turnover below Sh100 million.

The proposal aimed at avoiding “arbitrary tax estimates by the Tanzania Revenue Authority (TRA)” and enhance predictability and certainty of tax estimates.

The initial suggestion, according to the association, was for the targeted transporters to pay a predetermined amount of Sh1.5 million per lorry each year as final income tax.

The Finance Bill was said to have passed a presumptive tax of Sh3.5 million per vehicle per annum and that its applicability would be voluntary, with an option to submit audited accounts for tax estimates.

However, the Finance Act introduced the new tax, contrary to the Finance Bill.

“This means that for a transporter with 400 lorries, advance tax due will be Sh1.116 billion even before doing any business and realising any profit. This is rather unrealistic as it implies that the business is expected to generate profit of at least Sh3.7 billion which practically is not possible based on historical industry average data,” read part of the statement.

Tatoa chairman Elias Lukumay told The Citizen that the government promised to meet with the stakeholders on December 15 last year but it did not happen.

“Our complaints, which were proposed in the finance bill, are not in the act and this will hurt investors in this sector,” he said.

He said for instance, with such taxation level, the biggest challenge will be at the port where transporters will not be given tax clearance to unload the cargo.

“We also wanted to know what would happen to the tax if a lorry is involved in an accident and does not operate because the TRA has already begun enforcing the law and taxing people,” he said.

When contacted for comment, Mr Richard Kayombo, the TRA’s director of taxpayer services and education, said he had not seen the complaints.