15 December 2012

Tanzania: State to Review Taxes On Beverages

THE government may review excise duty on beverages following complaints from various stakeholders that the taxes were high.

President Jakaya Kikwete said on Thursday night in Dar es Salaam that the government will look into strategies to reduce the taxes. "We will strategise and see how we can cut taxes on beverages. Through this work, we expect to come up with the most appropriate solution.

But let me remind you, there is no tax review that will come without some complaints from the public," he said. He said the government is aware that the domestic manufacturing industry is yet to develop to levels of more competitiveness and offer more benefits to the people.

The president made the remarks during his address at the Manufacturer of the Year Awards Gala. His remarks followed comments from the Confederation of Tanzania Industries (CTI) that the government was losing billions that could be collected in tax revenues in the current financial year due to an increase of 25 per cent in excise duty on various types of beverages.

Making reference to studies that have been conducted by CTI, Mr Felix Mosha, Chairman of the confederation's governing council, said the government was losing about 40bn/- from Tanzania Breweries Limited (TBL) alone per year as a result of the decline of the company's sales on its products.

"This is not good for the economy and this would cut down the revenue of manufacturers, yet they have invested millions in production," he said. To expand its tax base, the government has annually been increasing taxes, especially on luxury goods such as beer, cigarettes and soft drinks by raising tariffs on the products.

Mr Mosha said that heavy excise duty increases production costs for companies, ultimately driving up prices and weakening the competitiveness of businesses. The recommendations made by CTI on reduction of tax rates were influenced by economic estimates and the challenges that faced this particular industry sector in 2010 and 2011.

He argued that if the recommendations would be accepted, the industry would grow at a rate of 10 per cent and increase exports by 25 per cent.

"As a result the competitiveness of our industries would increase and the government would increase its revenues," he said. Examples given of some companies affected by increase in such tax include Tanzania Distilleries Limited and Serengeti Breweries Limited (SBL).

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