SOME tax, audit and advisory firms said the 2023/24 budget is positive for the economy if implemented accordingly and will significantly advance the business environment.
The firms’ analysed reports showed that the budget’s ambitious revenue collection target seems attainable. However, they pointed at areas of improvement.
The firms – PwC Tanzania, Deloitte Tanzania and Confederation of Tanzania Industries (CTI), termed the budget estimates as ‘pivoting for inclusive growth; promoting the growth of industries and building resilience and driving growth amidst global uncertainty’.
The CTI First Vice-Chairperson, Mr Hussein Sufiani told reporters that the government has taken various reforms in the tax structure, fees levies and amended laws and regulations to improve the business environment.
“The government’s commitment is particularly evident in the budget, with tangible investment and new measures to promote growth of industries, entrepreneurship and job creation,” Mr Sufiani said on Tuesday.
“The proposed tax measures will significantly help domestic industries to reduce the cost of production, improve consumer welfare, promote the use of local materials, enhance competitiveness and stimulate economic growth,” he said.
Minister for Finance and Planning, Dr Mwigulu Nchemba on Thursday last week unveiled a 44.39tri/- national budget for the next fiscal year, up from the 41tri/- budget in the 2022/23 financial year.
In the coming year, domestic revenue is projected to be 31.38tri/- equivalent to 70.7 per cent of the total budget.
Deloitte Tanzania, Tax and Legal Partner, Festo Barthalome said in its budget analysis report that external non-concessional debt financing has been reduced by 31 per cent from last year, a welcome move that will help improve the country’s debt sustainability in these trying times.
“This year’s budget provides the government with an opportunity to enable broad-based solutions that will truly put Tanzania on course towards inclusive growth,” Mr Barthalome said.
To balance between revenue collection and fostering economic growth, he said, the government proposes several reforms to tax laws and regulations such as expanding tax on tobacco products, limiting tax exemptions to 1.0 per cent of GDP and proposing to increase focus on non-tax incentives.
“Tanzania needs loftier goals when it comes to tax reform, which has the potential to simultaneously fix the structural deficit, realign incentives and boost the productive capacity of the economy,” Mr Barthalome said
The areas of focus on non-tax incentives are land, water, infrastructure, and energy, increase consumption taxes such as excise, and modest VAT measures aimed at incentivising certain sectors such as tourism.
PwC headlined the 2023/24 budget as ‘building resilience and driving growth amidst global uncertainty’,
It said the transformation of the nation to a digital economy was another key theme, with reference to a number of initiatives taken in this regard by the government.
“…The 2023/24 tax revenue budget whilst ambitious does seem achievable, the PwC report said adding:
“A particularly important, and potentially transformative, announcement was the reference to the removal of the mobile money transaction levy on electronic money transmission, so that a transaction levy will only apply at the point of exiting the electronic ecosystem, namely at withdrawal,” PwC said in its budget bulletin.
Further, PwC said, the positive news for the sector was the removal of the airtime (simcard) levy as well as the reduction of right-of-way charges for fibre optic cable.
The 2023/24 budget is 7.0 per cent higher than the previous and the estimates showed that the government intends to allocate funds guided by its five-year development plan with plans to increase annual GDP growth to 8.0 per cent.
The proposed budget reduces excise duty on domestic manufactured ready to drink by almost half, increases the excise duty rate on imported energy drinks by almost 20/- per litre, and introduces a three-year excise duty freeze calendar from next month.
Also, CTI mentioned including an adjustment of the rate of 10 per cent to the specific excise duty rates on non-petroleum products and 20 per cent on beer and tobacco products.
“Increasing of 20 per cent excise duty on beer and tobacco products introduction of excise duty at the rate of 20/- per kilogramme of imported and domestically manufactured cement will have a negative impact on industrial development,” Mr Sufiani said.
PwC also raised a red-flag on increasing taxes on beer and tobacco, saying this will be of significant concern to beer and cigarette manufacturers, especially with indications of more constrained demand in the first half of 2023 as compared to 2022.
“The government’s rationale for such a drastic increase is that the last upward adjustment for locally manufactured excisable goods was in 2017,” stated PwC, warning that the increase will also be a concern for example, producers of soft drinks.
Additionally, the reduction of import duty on clothes ‘kanga’ and ‘kitenge’ from 50 per cent to 35 per cent, as well as valuation from 80 cent US dollars to 40 cent US dollars per meter, will have a huge negative impact on the industries which incidentally are among the leading industries that bring in more tax revenue in the country. Also, they want the previous taxes on cotton yarn to stay.
Imposition of excise duty at a rate of 20/- per kilogramme on cement reduces the effect of emission gases not only means an increase in cost but manufacturers will also face the existing challenges in the implementation of Electronic Tax Stamp (ETS). The significant related costs are equipment installation and operations of the system.
