Wilfred Edwin
6 September 2008
Nairobi — Tanzania will retain the 10 per cent Common External Tariff on imported crude edible oil contrary to an earlier proposal that it does away with it.
Finance and Economic Affairs Minister Mustafa Mkulo said this follows a meeting with stakeholders on July 25 in Dodoma. However, the government will study the oil requirements of the country before taking further action.
Members of Parliament warned the government last week that the proposal to reduce the excise duty would be to the detriment of local production.
MPs Kilontsi Mporogomyi (CCM, Kasulu West) and Aloyce Kimaro (CCM, Vunjo) complained over the reduction of excise duty on imported crude oil, saying it was done to enrich a few.
While presenting the budget in June, Mr Mkullo had warned that the government stood to lose $635,000 in revenue as it moved to harmonise its import duties with those of the East African Community Customs Union.
The EAC Management Act has proposed that import duty for several goods be amended or scrapped completely. The proposals were to be submitted to the Sectoral Committee on Trade, Finance and Investment for endorsement.
The import duties that were earmarked to be scrapped included those on hand hoes and other agricultural implements, inputs imported by Tanzania power firm Tanelec for the manufacture of transformers and switch gears; up to 20,000 metric tonnes of barley that will be imported by brewery companies in Tanzania and data processing machines.
Other products were sodium sulphate (from 25 per cent to 10 per cent) and vehicles specifically designed for garbage collection procured by local authorities or their approved agents.
However, semi-processed palm oil will continue to attract import duty of 10 per cent.
In the 2006/07 budget, Tanzania decided to stay the application of the CET for one year on imports of crude palm oil. Intense lobbying followed the government's announcement of the new tariff last year.
Edible oil manufacturers lobbied for a revised rate, while those in seed and oil industries called for even higher duty.
The debate not only created a bitter division between edible oil manufacturers -- who are largely the importers of crude palm oil -- and local seed and oil industries, who are buyers of local grown seeds, but also threatened to create rifts between government officials.
According to experts, the government's decision had serious consequences for the industry, as it would have made intermediate imports of palm oil from Kenya and Uganda cheaper, since the imports would not have attracted the 10 per cent duty for the crude oil. At risk was a combined refinery investment of $125 million and more than 2,000 jobs.
This would, to a large extent have encouraged large-scale smuggling of the product into the country. Industry players warned that the government would have lost revenue amounting to Tsh2 billion ($1.5 million) a month if the refinery were to collapse.
Former finance minister Zakia Meghji had said at the time that the 10 per cent duty rate decision was taken "in order to protect local farmers producing alternative oil seeds and curb tax evasion."
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