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2009-11-27 08:52:00
Tax waivers set to eat up Sh3 trillion
Finance minister Mustafa MkuloThe sum is almost a third of the Sh9.5 trillion national Budget
By Damas Kanyabwoya
THE CITIZEN
As the government grapples with its failure to meet its revenue collection targets, Finance minister Mustafa Mkulo said yesterday that tax exemptions amounting to Sh3 trillion
will be granted during the current financial year.
The decision to let go an equivalent of a third of the Sh9.5 trillion national Budget, will come as a surprise, as the jinx of the missed tax collection targets in the first quarter of the financial year has yet to be fully explained.
The money to be foregone during the 2009/10 financial year is over half, or 57 per cent of the targeted tax revenue. It is also almost equivalent to the total foreign financing of the Budget and exceeds the $831 million (about Sh1.08 trillion) general budget support (GBS) for the whole fiscal year.
Last week, our sister paper, the Sunday Citizen, exclusively reported that the Tanzania Revenue Authority (TRA) had missed its collection targets for the first quarter of 2009/10 by a whopping Sh100 billion.
Impeccable sources said the situation was not been any better in October, and is not expected to improve this month either.
If the dismal collections persist, the government may find it increasingly difficult to finance the 2009/2010 Budget, which would force it tosector borrowers. Late last month, the
director of economic research and policy at the Bank of Tanzania, Dr Joe Masawe, exclusively told this paper that the
revenue target for the 2008/09 financial year was missed by about 10 per cent.
Yesterday, speaking at the end of the 4th Taxpayers' Week celebrations in Dar es Salaam, Mr Mkulo said the exemptions, amounting to about 30 per cent of this year�s Sh9.5 trillion Budget, were "too much" for a poor country like to Tanzania to shoulder.
"The tax we exempt is almost equal to the budget support we receive from donors. This means that if we did not have to exempt that much tax, we would not need to turn our bowls to donors to fund our budgets,"he said.
Mr Mkulo made the revelations in response to a question from a representative of the private sector, Mr Ndibalema Mayanja, who asked why the TRA had forced investors who had certificates of incentives to pay taxes.
"The private sector is concerned about the conflicting policies of various departments of the same government. This is because TRA does not seem to recognise the certificate of incentives offered to investors by the Tanzania Investments Centre. Why the confusion?"Mr Mayanja had asked.
But Mr Mkulo said investors were only obliged to pay for the importation of �deemed capital goods", as opposed to capital goods. "Exemptions are still granted for capital goods imports. These are items such as machinery that are necessary for establishing an investment or a
business," he added.
There had been a strong push from some investors, especially from the hospitality industry, for the exemption of tax on "deemed capital goods", he said, listing items such as spoons, cups, plates, pillow covers, and bed sheets.
He said investors who "still insist on exemptions on �deemed capital goods� are doing a poor country like Tanzania a disservice because it needs taxes to survive�.
Tanzania, Mr Mkulo added, has the largest amount of exemptions compared to its neighbours Kenya and Uganda. "Our friends Kenya, and we have the Kenya Revenue Authority commissioner general, Mr [Michael] Waweru, here, fund their budget to the tune of 97 per cent. But their tax exemptions are only one per cent of the GDP compared to Tanzania's 3.5 per cent.�
The government, the minister said, was determined to reduce the exemptions. Ongoing negotiations with mining companies on tax exemptions were bearing fruit and most of them would start paying corporate tax and other duties in the next financial year.
�They seem to appreciate that our tax exemptions are too generous and
should be reduced,� he said. Last June, when he tabled the Budget in Parliament in Dodoma, Mr Mkulo scrapped most tax exemptions, including those offered to religious
institutions and donors. But following an uproar, especially among the religious
organisations, the exemptions were reinstated.
Yesterday, private sector representative Mayanja urged the government to reduce value added tax (VAT) from the current 18 to 15 per cent to enable local businesses to become
more competitive.He said that in addition to the high cost of doing business, tax for local businesses were too high, making them unable to compete effectively with cheap imports.
�We commend the government for heeding our call and reducing VAT from
20 to 18 per cent. But we are requesting for a further decrease to 15 per cent to help our businesses cope with increased competition from cheap imports,� he said.
But Mr Mkulo said if the private sector wanted a further cut in the VAT rate, it should also come up with proposals on how the revenue shortfall would be met.
The minister challenged the TRA to widen the tax base, saying that only about 500,000 in the population of about 40 million paid taxes, increase its borrowing from domestic
sources at the peril of the private
Tax waivers set to eat up Sh3 trillion
Finance minister Mustafa MkuloThe sum is almost a third of the Sh9.5 trillion national Budget
By Damas Kanyabwoya
THE CITIZEN
As the government grapples with its failure to meet its revenue collection targets, Finance minister Mustafa Mkulo said yesterday that tax exemptions amounting to Sh3 trillion
will be granted during the current financial year.
The decision to let go an equivalent of a third of the Sh9.5 trillion national Budget, will come as a surprise, as the jinx of the missed tax collection targets in the first quarter of the financial year has yet to be fully explained.
The money to be foregone during the 2009/10 financial year is over half, or 57 per cent of the targeted tax revenue. It is also almost equivalent to the total foreign financing of the Budget and exceeds the $831 million (about Sh1.08 trillion) general budget support (GBS) for the whole fiscal year.
Last week, our sister paper, the Sunday Citizen, exclusively reported that the Tanzania Revenue Authority (TRA) had missed its collection targets for the first quarter of 2009/10 by a whopping Sh100 billion.
Impeccable sources said the situation was not been any better in October, and is not expected to improve this month either.
If the dismal collections persist, the government may find it increasingly difficult to finance the 2009/2010 Budget, which would force it tosector borrowers. Late last month, the
director of economic research and policy at the Bank of Tanzania, Dr Joe Masawe, exclusively told this paper that the
revenue target for the 2008/09 financial year was missed by about 10 per cent.
Yesterday, speaking at the end of the 4th Taxpayers' Week celebrations in Dar es Salaam, Mr Mkulo said the exemptions, amounting to about 30 per cent of this year�s Sh9.5 trillion Budget, were "too much" for a poor country like to Tanzania to shoulder.
"The tax we exempt is almost equal to the budget support we receive from donors. This means that if we did not have to exempt that much tax, we would not need to turn our bowls to donors to fund our budgets,"he said.
Mr Mkulo made the revelations in response to a question from a representative of the private sector, Mr Ndibalema Mayanja, who asked why the TRA had forced investors who had certificates of incentives to pay taxes.
"The private sector is concerned about the conflicting policies of various departments of the same government. This is because TRA does not seem to recognise the certificate of incentives offered to investors by the Tanzania Investments Centre. Why the confusion?"Mr Mayanja had asked.
But Mr Mkulo said investors were only obliged to pay for the importation of �deemed capital goods", as opposed to capital goods. "Exemptions are still granted for capital goods imports. These are items such as machinery that are necessary for establishing an investment or a
business," he added.
There had been a strong push from some investors, especially from the hospitality industry, for the exemption of tax on "deemed capital goods", he said, listing items such as spoons, cups, plates, pillow covers, and bed sheets.
He said investors who "still insist on exemptions on �deemed capital goods� are doing a poor country like Tanzania a disservice because it needs taxes to survive�.
Tanzania, Mr Mkulo added, has the largest amount of exemptions compared to its neighbours Kenya and Uganda. "Our friends Kenya, and we have the Kenya Revenue Authority commissioner general, Mr [Michael] Waweru, here, fund their budget to the tune of 97 per cent. But their tax exemptions are only one per cent of the GDP compared to Tanzania's 3.5 per cent.�
The government, the minister said, was determined to reduce the exemptions. Ongoing negotiations with mining companies on tax exemptions were bearing fruit and most of them would start paying corporate tax and other duties in the next financial year.
�They seem to appreciate that our tax exemptions are too generous and
should be reduced,� he said. Last June, when he tabled the Budget in Parliament in Dodoma, Mr Mkulo scrapped most tax exemptions, including those offered to religious
institutions and donors. But following an uproar, especially among the religious
organisations, the exemptions were reinstated.
Yesterday, private sector representative Mayanja urged the government to reduce value added tax (VAT) from the current 18 to 15 per cent to enable local businesses to become
more competitive.He said that in addition to the high cost of doing business, tax for local businesses were too high, making them unable to compete effectively with cheap imports.
�We commend the government for heeding our call and reducing VAT from
20 to 18 per cent. But we are requesting for a further decrease to 15 per cent to help our businesses cope with increased competition from cheap imports,� he said.
But Mr Mkulo said if the private sector wanted a further cut in the VAT rate, it should also come up with proposals on how the revenue shortfall would be met.
The minister challenged the TRA to widen the tax base, saying that only about 500,000 in the population of about 40 million paid taxes, increase its borrowing from domestic
sources at the peril of the private
