18 June 2012

Tanzania: MPs Worried Over 'Narrow Tax Base'

Dodoma — Members of Parliament (MPs) will on Monday start debating the government's budget for the 2012/13 financial year, which is expected to be dominated by criticism on increased excise tax on various items including soft drinks and mobile phone airtime.

Last Thursday, the government announced several new taxes and raised excise duty for various items including beer, soft drinks, spirits and cigarettes.

The Minister for Finance and Economic Affairs, Dr William Mgimwa, told the National Assembly that the government plans to spend 15.1tri/- during the 2012/13 fiscal year.

He said 10.5tri/- would be spent on recurrent votes, while 4.527tri/- for development projects. The minister pointed out that 8.714tri/- would be raised by the government from local sources. He said 8.07tri/- would be raised from tax revenue, while 644.58bn/- would come from non-tax sources.

He said local government authorities are expected to raise 362.2bn/- and development partners through general budget support (GBS) will bring in 842.4bn/- foreign loans and grants including Millennium Challenge Account 2.3tri/-, while 1.6tri/- will come from domestic borrowing.

The minister further said that 1.2tri/- would be secured through non-concessional borrowing. The budget has so far received mixed feelings. Some people, including a number of MPs, blame the government for a narrow tax-base with the tradition of depending on beer, soda and cigarettes.

"This is a tradition of copying and pasting. This time it is more painful. How do you raise excise duty on beer, soda, cigarettes and spirits by more than 20 per cent, well above inflation rate?" wondered a tax consultant, Mr Placious Luoga.

On Friday, the private sector urged the government to increase spending on development projects to speed up economic growth and lift millions of Tanzanians out of poverty. "We need to increase spending on rehabilitation of the railway network, ports, airports and roads as a permanent solution to our problems," said Tanzania Private Sector Foundation (TPSF) Executive Director, Mr Godfrey Simbeye.

He said 70 per cent of the government budget would go to recurrent votes, meaning spending on salaries, allowances and fuel and vehicle maintenance. Mr Simbeye said it was unfortunate that the state depends mostly on foreign resources to finance development projects. "Let us look locally to build roads, railway and ports," he addded.

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