IT’S A FEEL GOOD BUDGET

In Summary

The minister sparked wild scenes in the House as excited MPs cheered a raft of recommendations seen as lessening the tax burden on farmers and medium and small-scale businesses. It was also a plan to woo investors to help attain President John Magufuli’s industrialization dream.

Dodoma. Finance minister Doctor Philip Mpango captivated Parliament on Thursday with delivery of a budget speech that was tailored to leave everyone with something to cheer about.

The minister sparked wild scenes in the House as excited MPs cheered a raft of recommendations seen as lessening the tax burden on farmers and medium and small-scale businesses. It was also a plan to woo investors to help attain President John Magufuli’s industrialisation dream.

It was a budget speech like never before, with Speaker Job Ndugai forced to intervene on a number of occasions to beseech MPs who were on their feet clapping and thumping to let the minister continue with his presentation.

But in the end, Dr Mpango’s Sh31.7 trillion revenue and expenditure plan for 2017/18 read for more than two hours was both sweet and bitter, putting a smile on the faces of some but raiding big business, especially in mining, with the surprise introduction a 1 per cent new tax on the value of mineral exports.

Small-scale miners will now also pay a 5 per cent withholding tax on the value of their minerals.

As is the norm, sin tax went up while the minister ended a long break on fuel tax by introducing excise duty of Sh40 per litre of petrol, diesel and kerosene which will likely impact on the cost of goods and services.

Dr Mpango cleverly swapped the new fuel tax with the scrapping of the nuisance annual motor vehicle licence fee to draw the loudest of the cheers from MPs and crowds following the proceedings on radio and television.

The minister said the government will also pardon all the debts associated with this tax that was being charged even on unused vehicles. 

He said the tax will be charged only once during registration of vehicles whose cost however went up by Sh50,000 depending on the engine size of the car.

The minister appeared to have read from the same script as MPs who rooted for the changes during the debate of most the ministerial budget allocations.

Farmers who had crop cess on less than a tonne of produce dropped, fishermen whose corporate tax on vessels was cut from 30 to 10 per cent, the disabled whose equipment was zero-rated and trackers whose VAT on transit goods was dropped were some of the big winners. The qualifying amount of non-commercial motor vehicle has also been raised from Sh15 million to Sh30 million.

Informal traders too will now be officially registered and special areas set aside for them to carry out their businesses without the harassment from local authorities.

Dr Mpango who used a considerable time to praise Dr Magufuli and his vision for Tanzania noted that his proposed reforms seeks to put the country on the right path to achieve its industrialization agenda.

His VAT exemption on imported capital goods was seen as a deliberate measure to woo industrial investors and shore the recently tumbling export of manufactured goods.

“My plan aims at building a strong base for industrial economy and widening employment opportunities and trade,” Dr Mpango told a fully-packed House.

In the endeavour to promote investment in the assembling of vehicles, tractors and fishing boats, a vital step towards nurturing the growth of small, medium and largest scale industries, the reduced Corporate Income Tax on the services from 30 per cent to 10 per cent for the first five years from commencement of operations.

The drop in importation of capital goods - which are meant to boost industrial activities in technologically-challenged countries like Tanzania saw exempting VAT on capital goods in order to reduce procurement and importation costs on machines and plants used in production.

“The objective of this measure is to promote investments in small, medium and large scale industries by providing relief on taxes in the purchase of machines and plants,” he said.

Apart from reducing import duties on several other products, in line with the East African Community Management Act, 2004, Dr Mpango promised to bring a Finance Bill into Parliament that will specifically abolish some fees and levies which are considered to be undermining the government efforts in improving business environment and reducing poverty.

Exemption of VAT on transit goods would change the dropping fortunes of the Dar es Salaam port that has recently lost cargo volumes to competing ports in the region.

The move, he said, will make Tanzania a preferred route for landlocked countries’ imports and therefore, increase employment opportunities and government revenue.

Livestock keepers will also have something to smile about in Dr Mpango’s plan as he has decided to exempt VAT on locally produced compounded animal feeds. The government is also exempting VAT on fertilized eggs for incubation.

Consumers of soft drinks, cigarettes and beer will dig deeper into their pockets as the government adjusted excise duty on their products up by five per cent.

Minerals

The government will not allow direct exportation of minerals from the mines to other countries as the government seeks to reap maximum benefits from the industry.

Dr Mpango said yesterday that the government will come up with a new system that will involve creation of clearing houses at the international airports, mining areas and other appropriate areas where the mineral will be verified and issued with export permits before being exported.

The government is also imposing a clearing fee of one per cent of the value of minerals.

The government will also introduced a Withholding Tax of five per cent of the total market value of minerals to all small miners as the government seeks to collect optimal revenues from the sector.

Property tax

The government will continue to collect Property Tax for both valued and non-valued houses in all local government authorities.

TRA will continue to collect the tax as determined by the Minister of Finance and Planning. For unvalued houses, a flat rate of Sh10,000 per normal house will be charged and Sh50,000 on every floor of a multiple storey house.

Source: The Citizen