Chademas Budget proposes tax cuts Tuesday, 10 May 2011 23:04 d By Edward Qorro, The Citizen Reporter Dar es Salaam. Chama cha Demokrasia na Maendeleo (Chadema) has floated budget proposals that entail slashing fuel levies by half as a way to control spiralling prices of this form of energy. But the proposals, delivered by the shadow minister for Finance, Mr Zitto Kabwe, have triggered mixed reactions, with economic experts noting that much as they make sense, implementing them would require immense dedication. Speaking on the proposals from Sumbawanga where he is conducting party activities, Mr Kabwe told The Citizen yesterday that the cost of living could be reduced drastically if the government slashed levies imposed on fuel by half. He came up with three ways of tackling inflation, saying that if well implemented, these would ease pressure on the cost of living.As long as we have no control over fuel prices in the world market, it is important that we reduce fuel levy by fifty per cent. This is the only thing we can do if we want to control fuel prices, he said. In order to recoup the income lost after the move, the shadow minister proposed a number of measures, including floating of shares that the government holds in a number of companies, including Airtel and NMB Bank. Mr Kabwe also said the government should strive to reduce tax exemptions from the current levels of 2.5 per cent of the Gross Domestic Product (GDP) which is equivalent to Sh630billion per year, to only one per cent of the GDP which would mean saving Sh400 billion. The shadow minister argued that of if the government sold 25 per cent of its Airtel shares, it would add to its coffers Sh324 billion, while offloading 15 per cent of its NMB would boost its kitty with Sh200 billion. Floating of the shares would also means that we allow Tanzanians to own their economy, he said. He insisted that once listed at DSE, such companies would be more open and this could see the government earnings increase as people move in to buy shares, boosting capitals of the companies in the process. But a researcher with the Economic Research Bureau (ERB) of the University of Dar es Salaam, Dr Haji Semboja, said reducing the taxes on fuel would not be helpful if the country wont support the State-run Tanzania Petroleum Development Corporation (TPDC). He also proposed development of alternative energy sources such as natural gas, which the country has in abundance, as way of reducing consumption of petroleum products.The point should not be about cutting down the taxes; it should be about processing our own sources of energy, he said. According to the don, reducing the fuel taxes would reduce the governments capacity to fund all its activities. On the selling of government stake, Dr Semboja cautioned that the issue at hand should not be weakening government grip of such important companies, but rather to increase its control of the shares so as to not divert the countrys economy. Commenting on the issue of shares, Prof Humphrey Moshi from the Economics Department of the University of Dar es Salaam supported the idea of selling its shares. He further cited the Air Tanzania Company Limited (ATCL) as one of the entities the government should let go. We have a lot of potential in the private sectors; why not sell ATCL which has been making losses for years? We can, for instance, sell it to Precision Air, he proposed. Mr Kabwe, who is also Kigoma North MP, said after selling the shares the dividend would benefit common Tanzanians.Listed companies are usually transparent; the main reason the government failed to earn tax money from the sale of Airtel is that the company is not listed, he noted. But the MP said Chademas proposals should be seen as a short-term measure to control the economy, otherwise the long-term measure should be increasing agricultural output. Elaborating, he said since the majority of Tanzanians are employed in agriculture, a green revolution would be the surest way to move the country forward. Dr Ngowi concurred with Mr Kabwe saying that food sustainability was an important factor in boosting Tanzanias agriculture fed economy. Mr Hussein Kamote from the Confederation of Tanzania Industries (CTI) also concurred with Mr Kabwe on the issue of selling shares, saying that the process would mop up money from circulation. This will help us a lot if in our effort to stabilise the economy, he asserted. Reached for comment on how much the government would lose should the fuel tax be reduced by 50 per cent, Mr Protas Mmanda, the Director of Taxpayer Education from the Tanzania Revenue Authority (TRA) would not comment, saying he was on leave. Im on leave, I need to retrieve such figures from the database and that isnt possible for now, he said. However, according to TRA website, the government currently charges Sh200 levy on every litre of petrol of diesel imported. Fuel prices stand at around Sh2,000 presently. Of the amount, in addition to Sh200 per litre as fuel levy, the government also gets excise duty amounting to around Sh320 per litre. There is also the Energy and Water Regulatory Authority (Ewura) levy of between Sh7 and 6 per litre. According to cost analysis by Platt, a fuel importing company, other charges include wharfage, Value Added tax (VAT), destination inspection, Sumatra levy as well as Tanzania Bureau of Standards (TBS) application and testing fee and Tipper fees. The costs also account for fuel loss in the ocean, demurrage charges, evaporation, surveyors costs and financing costs, which make the cost of a litre of petrol moved from Dar es Salaam port to the retail point reaching Sh540, according to data compiled by Platt in January 2009.