6 February 2011

Tanzania: New Hope As Revenue Collection Hits Record

Revenue collections improved in December 2010, reviving hopes that the 2010/2011 budget, endorsed by parliament in June last year, would be carried out smoothly.Tanzania Revenue Authority (TRA) obtained an unprecedented amount of Sh572.771 billion surpassing its own collection target by three per cent.

"Revenue collection is not very bad... in fact in December we managed to achieve 103 per cent of the collection target, recording the highest monthly collection ever in TRA's history," a reliable source at TRA told The Citizen at the weekend.

But, according to Dr Honest Ngowi, an economic expert of Mzumbe University, there was nothing amazing in the collection given the intense business activities towards the end-of-year holidays.

The festival season, he explained, normally sparked business and sales went up around the period. That should stimulate good returns in business.

As the pace of commercial activities slowed down in the months after the holiday season, Dr Ngowi said that TRA would not be able to maintain the same level of revenue collection, particularly in view of the rolling blackouts that Tanesco applies to conserve power supplies.

Civic United Front (CUF) chairman, Prof Ibrahim Lipumba, also a renowned economist, argued that the declining value of the shilling could have also contributed to the increase in revenue collection.

"The increase can mean that revenues from import duties which are calculated at the dollar exchange rate can appear higher once they are converted into Tanzanian shillings," he said.

Both Prof Lipumba and Dr Ngowi expressed that increased revenue collection was one thing and putting the money into good use was quite another thing. They urged prudence in government expenditure.According to the TRA source, collections for January 2011 were also pointing to another "marvellous" performance because there were encouraging signals to that end.

This is the first time in about two years that TRA went beyond its monthly projection. Since the 2008/09 fiscal, the taxman had neither surpassed nor hit monthly targets, a situation that constrained the budget.In the 2009/10 financial year domestic revenue collections (excluding revenues generated by local authorities) reached Sh4.662 trillion - a nine per cent shortfall on a budget of Sh5.096 trillion.

With the December 2010 collections, the anticipated deficit in 2010/11 has been reduced from 12 percent to 8 percent at the close of the first quarter of the fiscal year.

The taxman is hopeful to offset the shortfall during the second half of the financial year (January to June 2011). "We are not turning back... a lot should be achieved in the six months to June," said the source.Under the current budget, totalling Sh11.6 trillion, TRA should bag Sh5.653 trillion out of the envisaged domestic revenue of Sh6.004 trillion.

It has so far collected Sh2.567 trillion against a target of Sh2.801trillion between July and December 2010.

Improved revenue collection at the time when the government struggles with tight expenditure and a cutback in donor support should give policymakers some relief. According to the Bank of Tanzania, government expenditure between July and November was Sh567.9billion less than the projected figure, mainly on account of reduced donor funding.

"During the first five months of 2010/11, government expenditure accumulated to Sh3.509 trillion, being lower than the estimate of Sh4.077trillion, mainly due to shortfall in the disbursement of donor funds," said the BoT in its December 2010 Monthly Economic Review.

Meanwhile, experts paint a gloomy picture of Tanzania's economy this year due to the current drought in various areas and increased power tariffs.

Headline inflation for December 2010 increased to 5.6 per cent from 5.5 per cent in November due to end-of-year festivals that pushed up the cost of food and soft drinks. In October 2010, inflation stood at 4.2 per cent, according to National Bureau of Statistics figures.

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