News Column

Experts Hail Tax Exemptions Cut

June 16, 2014

Orton Kiishweko

VARIOUS tax experts and private sector have praised the government's move to review provisions of expensive tax exemptions in the 2014/2015 national budget tabled by Finance Minister, Saada Mkuya, on Thursday evening.

Speaking at a Breakfast Meeting focusing on budget highlights organised by Ernest and Young in Dar es Salaam on Friday, private sector leaders and academicians noted that abolition of expensive tax exemptions laid better ground for the financial year that starts in July, in terms of tapping a window initially neglected.

Other participants projected 2014/2015 as being of significance as it would conclude MKUKUTA 1, a government poverty reduction blue print and the five year development programme that ends in early 2016.

The Director of Finance at Tanzania Investments Bank (TIB), Mr Bernad Mono, said there was some level of relief to his sector given that the government had listened to them and removed excise duty on money transfers.

"This was causing an administrative burden to the banks," he said and hailed removal of powers from the minister to have discretion to give tax exemptions.

"This is a good development, as hopefully, it will reduce unnecessary exemptions and widen government revenues," he said, adding that the government announcement to publish all tax exemptions on the ministry's websites in the subsequent financial year as an act of transparency.

He noted that he would have been happier if the development expenditure was bigger than the recurrent one, noting it was unwise to collect just to spend.

Country Director for Ernst and Young in Tanzania, Mr Joseph Sheffu, said that as MKUKUTA two ends this year and the five year development programme concludes in 2016, there was a need for one integrated strategy that should offer development guideline after the two programmes.

He said this would call for integrating poverty issues into the bigger development agenda, noting that evaluations of Millennium Development Goals (MDGs), MKUKUTA 2 and the five year development plan would be interesting to watch in 2015.

He said the 2014/2015 budget was coming under challenging circumstances that would have a lot of bearing on the spending, further highlighting the funds that would go to the constitution review process, the general elections next year, among others.

He praised the ministry's move to announce plans to come up with new microfinance policy (2014-2015) and national micro finance strategy.

He, however, noted that the bulk procurement proposal tabled by the minister for government office supplies could discourage local entrepreneurs who have already invested into infrastructure to supply such to government and other local sellers, with some having employed thousands of Tanzanians along the supply chain.

He said the government could find a way of going around it as one way of supporting private sector and local entrepreneurs. The Director in tax department at Ernst and Young, Mr Laurian Justinian, said tax on leasing aircraft may not be a positive thing, noting that there are plans to lift ATCL further, a likelihood that it could lease more aircrafts in the subsequent financial year.

"This could affect efforts by the airline and other struggling airlines in the country too," he said. He said that once the Finance Bill is passed, they would hold client training on its details and implications in 2014/2015.

The Technical Manager at Financial Sector Deepening Trust, Mr Jonathan Kasembe, urged that the budget should have explicitly showed expected effort in expanding local tax base, calling it as a more long term strategy.

He said their findings had indicated that 95 per cent of existing small and Medium Enterprises are not formalised, which is a great potential to expand government revenue if they were to formalise. He noted it was important for the government to raise the level of public private partnerships as a way of raising growth.

The Ernst and Young Partner and Director of oil and Gas, Mr Russell Maynard, also added voice on need to widen tax base but urged against increasing various taxes, arguing that those would turn out costly for businesses.

He noted that more Foreign Direct Investments (FDI) would be a game changer for growth but in a fair manner such that there ismore returns to Tanzania. He also added that there are some tax exemptions which are well intentioned to encourage long term investments in the country.

Ms Beatrice Mrema from NBC Bank termed as positive for the government to cut down on tax exemptions, arguing that it could be a window to increase government revenue.

Earlier, Mr Sheffu had laid out the government's macroeconomic objectives and targets for the 2014/15 budget as focusing on real GDP projected to grow by 7.2 per cent in 2014 and continue growing at an annual average of 7.7 per cent in the medium term and maintaining a single digit annual inflation rate whereby annual inflation rate for the period ending June 2014 is projected at 6.0 per cent and 5.0 per cent in June 2015.

He said others were increasing domestic revenue to 18.9 per cent of GDP in 2014/15, maintain budget deficit after grants not exceeding 4.9 per cent of GDP in 2014/15 and containing the growth of extended broad money supply at 15.5 per cent in June 2015, consistent with real GDP growth and inflation targets.

The government would also accumulate gross official reserves adequate to cover at least 4 months of imports of goods and services by June 2015 and strengthen the shilling and maintain a stable and market determined exchange rate.

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Source: AllAfrica

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