Budget targets worry stakeholders

Budget targets worry stakeholders

They urged that inflationary taxes are imposed below the inflation rate and not above the rate, as in the last five months inflation rate climbed down by 1.5 per cent to 18.2 per cent of May.  Therefore going by statistics, the inflationary excise duty changes was suppose to be below 20 per cent, actually less than 18 per cent as the inflation does not show signs of going up, rather descending. 

PricewaterhouseCoopers (PWC) said the government has proposed to increase excise duty on beer by 25 per cent, meaning once the effect of Value Added Tax (VAT) on the excise duty is taken into account, the increase will actually be just under 30 per cent.  

“Therefore effective  July 1, we should expect to see a considerable increase in the price of beer,” PWC said when commenting on the 2012/13 budget speech.  The firm added that the largest contributors in terms of VAT and excise duty collections were  the telecommunication and alcohol industries.   “These industries together with the tobacco and carbonated soft drinks industries have been hit by significant excise duty increases,” PWC said in the report. 

The Confederation of Tanzania Industries (CTI) Chairman, Mr  Felix Mosha said this might make costumers to abandon consuming highly taxed items and at the end of the day create a deadweight loss taxes.  “The government should reverse the decision as the intended collection might not be realised as few will consume the goods, and create a spiral effect to manufacturers,” Mr Mosha told journalists over the weekend. 

The chairman said failure to attain the tax goal also affects manufacturers as they would lower production simply because goods produced are not selling; also sending unemployment rate high.  CTI suggested the inflationary rate on non petroleum products to go down to 12 per cent in order to address the high inflation. The current rate is 20 per cent. 

Said Salim Bakhresa & Company (SSB) Assistant General Manager Mr Hussein Sufian said the government should also consider lowering tax on bottled water to at least match the rate on fruit juices of 800/-per litre.  “This will stimulate consumption thus increase output,” Mr Sufian said “bottled water is used by people of all walks of life, ” he added.    At the moment, water attracts 69/- per litre.

SSB is the biggest fruit juices and bottled water producer in the country and a member of CTI.  On Skills Development Levy (SDL), CTI said, the rate should be reduced at least 2 per cent similar to Kenya as it increased labour costs and derailed the competitiveness of the country’s goods in the region. Other East African Community member states have zero SDL.  

However, in his maiden budget speech, Dr Mgimwa said there would be a review carried out on the applicable rates of SDL with a view of reducing the tax burden on employers and expanding employment opportunities in the country.  Meanwhile, PWC expressed concern on where the money to fund 2012/13 budget would come from as the “target is a challenging one”. 

The Minister for Finance and Economic Affairs, Dr William Mgimwa, intends to increase domestic revenues to 8.72tr/- representing 18 per cent of GDP compared to an anticipated 16.9 per cent for the year ended June 2012.   “Where are these extra revenues expected to come from?” PWC asked “Surprisingly, there were no increases in fuel taxes, which account for approximately 14 per cent of tax collections”. 

PWC added: “These taxes, which are specific tariffs (fixed shilling rates), have remained unchanged – so in inflation adjusted terms these have effectively reduced.”   According to them if one compares the budgeted 2012/13 revenues to a 12 month extrapolation of the nine month results to March 2012, it does indicate an assumption that tax revenues will rise by around 27 per cent, to 8.2tr/-, and non-tax revenues by around 78 per  cent to 645bn/-, a Herculean task.

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