Finance Act 2022: My proposed reforms on financial policy

If you are operating a business in Tanzania, then you are aware that, at the end of each fiscal year (30 June) a new Finance Act is enacted. The Finance Act is enacted to impose, repeal and alter taxes, duties, levies and fees, as well as to amend certain laws relating to the collection and management of public revenue.

The decision to pass the bill that will ultimately become the Finance Act, that enhance both fiscal and monetary impact to the economy, solely rests with the Parliament. However, this does not prevent the citizens from being engaged in the process. Usually, before the Finance Bill is brought to parliament for a vote, stakeholders are directly and indirectly engaged in the whole budget process which begins with submission of proposals (proposed changes), then to discussion of the proposed changes with the Ministry of Finance task force on tax reforms and later with the budgetary committee of the parliament.

Throughout the process, public and private stakeholders create avenues for their members who are directly affected by the changes and amendments of the laws and the public to submit their proposed changes or new laws to be included in the Finance Act. The proposals go through a trail of discussion and scrutiny before the final decision to include the min the Finance Act for the fiscal year is made.

The 2022/2023 Finance Act is around the corner and just like over the years, there are tax reform proposals from the business community. In my line of work as a tax advisor I have been able to preview of some of the proposals that taxpayers and businesses would want included in the 2022/23 Finance Act. Some of these proposals include: -

 Setting a time frame within which the Commissioner General is required to communicate a notice of admission or refusal for admission of the notice of objection and in cases of silence from the Commissioner General, upon the lapse of the given period the notices of objections filed should be deemed to have been admitted for determination. Example a one-month time frame, this will ensure short time conclusion of the objection process and enhance working efficiency of TRA’s technical team.  Clear interpretation of Section 56 of the Income Tax Act 2004 (ITA) by including a specific provision that stipulate the intended use of the section which is to capture and tax offshore share transactions that results in changes of the underlying ownership of a resident entity, by more than 50 percent. This is mainly to limit the provision to offshore transactions as other transactions apart from the offshore ones which affect resident entities are already taxed as single installment tax in section 90 of ITA. Setting a minimum threshold of underlying transaction value attributable to Tanzania that can trigger the provision of section 56.  Non-accrual of interest during the tax dispute process as provided by Section 76(4) of the Tax administration Act 2015. The taxpayer has no control of over the process and time it takes to settle the dispute. This is unjust as the taxpayer is punished while defending his/her rights.

 Temporary removal of fuel levies as a general observation. It is the public’s wish that the government directs more efforts on the current fuel crisis in upcoming Finance Act, which is the current burning issue affecting the country and the world at large. It is appreciated that the rise in price of fuel is mainly from the effects of the Russia-Ukraine crisis, which significantly disrupted the oil supply and consequently the fuel prices because of suppliers terminating their energy deals with Russia.

Despite, the big role played by market forces of demand and supply in determining the fuel price, the government can significantly help reduce fuel prices measures such as reducing the government levies on fuel which came along with the 2021/2022 Finance Act and were aimed at supporting the construction and maintenance of rural roads in Tanzania.

This may defeat the government’s initial intended purpose as projected revenue from oil and petroleum products will not be collected as envisioned. However, with the current rise in general price resulting from the fuel crisis, the government may first opt at regulating the prices to curb possibilities of inflation and its associated effects to the economy.

 Reducing the price of Electronic Tax Stamps (ETS) charged to manufacturers with the aim of reducing cost of production. ETS system was introduced to improve tax administration of excisable goods in the country, however the current price for the stamps is too high for manufacturers. It is also appreciated that the cost of ETS is because of high costs charged by the supply to the government. Therefore, to reduce the price of stamps, the government may keep up with the effort of seeking cheaper suppliers of ETS systems. As we wait for the final stages of this process, it is my prayer that the government will consider the above proposals.

Disclaimer: The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Citizen.