Dr Mpango’s second budget rekindles hope

MINISTER for Finance and Planning Dr Philip Mpango entering the parliament house to read his 2017/18 budget last week.


THAT is what can best describe the general mood in the country after the government tabled its 2017/18 budget in Parliament last week. With a 31.7tri/- budget up from 29.5tri/- of the current financial year, the government seeks to ramp up spending on infrastructure and industrialization of the economy without dramatic tax changes as it focuses on more effective tax administration by leveraging on technology.

Though they gave it a customary cautious welcome, analysts seem to generally view it as forward looking and most pragmatic, focusing on long term growth and driving tax compliance without taking away much from taxpayers by promoting digital initiatives.

Bullish sentiment have also greeted the budget as it seen to provide impetus to productivity in industries, agriculture, businesses and other entrepreneurial activities that registered slow growth in the current fiscal year.

The government showed to be attentive to sentiment by businesses by scrapping a number of taxes complained to have been counterproductive and handed out reliefs to motorists by removing the annual motor vehicle license fee and place it on fuel.

The 2017/18 budget will be financing the second year of the Five Year Development Plan II focusing on key flagship projects including construction of a Standard Gauge Railway (SGR), revamping of Air Tanzania Company Limited (ATCL), and developing the Mchuchuma Coal Mining and Liganga Iron Ore Mining projects.

It also focuses on construction of a Liquefied Natural Gas (LNG) plant in Lindi Region, establishment of Special Economic Zones (SEZ) in Tanga, Bagamoyo, Kigoma, Ruvuma and Mtwara; establishment of Kurasini Logistic Centre; and procurement of new and rehabilitation of existing ships for Victoria, Tanganyika, and Nyasa lakes. The government will borrow 6.17tri/-shillings in coming fiscal year from domestic sources and expects 3.97tri/-from external concessional loans and grants.

It will also seek an additional 1.59tri/- from external non-concessional loans. Direct exports of minerals from mines will be banned and instead clearing houses will be established at international airports and other appropriate places where a 1.0 per cent clearing fee on the value of minerals will be imposed so as to increase revenue from mineral resources. The new budget seeks also to introduce Withholding Tax of 5.0 per cent of the total value of minerals to all small miners to ensure optimal collection of government revenue.

Under various measures to strengthen and simplify revenue collection, all ministries, government departments and institutions will start using Government Electronic Payment Gateway System and Electronic Revenue Collection System (e-RCS) from July 1st.

The government will abolish the Annual Motor Licence fee much to the relief of motorists and introduce a flat rate tax of 10,000/- for houses that have not been valued and 50,000/- per each floor of a storey house will apply, he said.

The government plans also to provide identity cards to informal small businesses and those operating in informal places for example food vendors, small second hand clothes sellers, small agricultural produces (vegetables, banana, and fruits) sellers, he said.

An economist with TIB Development Bank, Dr Hildebrand Shayo said the 2017/18 is a smart fiscal budget of its own kind and if proposed funds for executing projects will be delivered on time will create a huge impact into Tanzania economy.

“While it is smart,” Dr Shayo said “government agencies are supposed to run profitably to avoid government rescue packages, incentives to retain and look for talents should be re-examined.”

However, he said “one more important issue is that for this plan to work, strategies geared to ensure proper execution plan and communication but above all timely real ease of financing is vital.” By April, the 2016/17 budget the government had collected about 70 per cent of the 29.54tri/- projected for the year. In the same period, the government spent 15.48tri/- on recurrent expenditure, equivalent to 87.4 per cent of the proposed recurrent expenditure for the year.

The development expenditure was 4.55tri/- amounting to 38.5 per cent of the 11.82tri/- allocated to development expenditure for the year. However, other analysts worry that it is very possible the increase of 40/- to a liter of petrol, diesel and kerosene for road license would eat up reduction in produce levy from five per cent to three per cent for cash crops and to two per cent on food crops. Also salaried workers and other people with fixed incomes have been left out of the budget while the cost of production and transport set to increase the cost of living.

The government’s failure to act on Skills and Development Levy (SDL) as well as the Pay As You Earn (PAYE) tax will be a bane to salaried workers.

Experts have always urged the government to reduce SDL to making hiring costs affordable, especially during the current hard economic times that have seen many businesses either closing down or reducing the number of workers. There was also no change in the taxation of individuals through the PAYE and the threshold for the top marginal rate of tax remains at 720,000/- per month.

Nevertheless, Confederation of Tanzania Industries (CTI) commended the budget estimates. CTI said the budget has positive impacts on the industrial sector, subject to the details in the financial bill. CTI Chairman, Dr Samuel Nyantahe said the budget estimates tabled on Friday in Parliament by the Minister for Finance and Planning, among other things aims at accelerating the pace of economic growth, with specific emphasis on industrial development in the country.

“It is our expectation that the priority areas for the development budget will be directed towards infrastructure development, which has a direct link to the revitalization of the industrial sector in the country,” Dr Nyantahe said.

Dr Nyantahe said the private sector is anticipated to play the role of being the engine of growth as the government has committed itself in increasing quality of education, health services, clean water and power supply.

The government has expressed its commitment during the budget estimates in fighting against corruption, implementing major reforms in public service, customer care and reducing bureaucracy as well as transforming and strengthening agriculture, livestock and fisheries sectors and promoting local value addition and commercialization.

He mentioned the measures, which if implemented will have positive impact on the manufacturing sector as maintaining import duty of 25 percent and introduction of specific duty of 200 US dollars per ton on metal and steel products used in construction as it protect domestic industries which produce the items.

The measures on the 2017/18 budget document will enable domestic industries to enhance production, improve consumer welfare, promote use of local materials, enhance competitiveness and stimulate economic growth.

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