THE Confederation of Tanzania Industries (CTI) and the Ministry of Finance are contemplating the best way to curb smuggling and tax evasion along the Zanzibar channel and save local industries from collapsing due to unequal competition in the domestic market.
CTI Chairman, Felix Moshi, has told the 'Daily News' the confederation had engaged the government to deal with widespread smuggling of commodities through Zanzibar, that has the twin effect of denying the government billions of shillings in revenue and undermining local industrial growth.
"This matter is being dealt with. We and the Treasury are working together to find the best way of dealing with the problem," he said in an interview.
Tanga Cement Managing Director Erik Westerberg said last week that the government is losing over 15bn/- annually in revenue due to smuggling and improperly taxed cement imports through Zanzibar.
Mr Westerberg said at the company's Annual General Meeting (AGM) that cement smuggling via Zanzibar channel was rife, thus undermining the prospects of local cement producers.
He said it was alarming that Zanzibar seemed to have three to four times higher the number of cement consumption than the Mainland while no major infrastructure or construction work is evident. According to Mr Moshi, there is widespread spreading along the channel, involving a variety of items, including cement and cooking oil.
The gravity of the problem was not only on the amount of money lost as government revenue, but also on the negative effects it has on the local industries.
"The problem is not on revenue only. It is even more serious on the effect to the local industries. Smuggling and tax evasion surely kill our industries," lamented Mr Mosha. He added that such tax evasion distorted competition in the domestic market as some products sell at lower prices due to under-taxation.
"Local industries cannot compete with traders who have evaded tax. They will be weakened and this will affect their productivity, employment and revenue to the government," he said.
Earlier, the Director of Taxpayer Education of the Tanzania Revenue Authority (TRA), Mr Richard Kayombo, said in an interview that the authority was working on the problem. "We are working on it. We have instituted round-the-clock surveillance involving experts from the police force," he said.
TRA has launched a media campaign aimed at sensitising transporters and traders on smuggling of goods along the Indian Ocean coast. The favourable economic climate in the country at the moment has caused an increase in the demand for cement, which local producers have failed to meet.
Statistics indicate that the combined production of Tanzania's three cement manufacturers -- Tanzania Portland Cement Company, Mbeya Cement Company Ltd and Tanga Cement Company -- stands at 3.75 million tonnes annually against the four million-tonne demand a year.
The government has allowed importation of cement to fill in the gap. Industry and Trade Minister Abdallah Kigoda said in February that the government would allow the imports until local producers are able to meet domestic demand. The minister said although imported cement was sold at a lower price compared to locally-produced cement, it should serve as a catalyst for local industries to be more competitive.