18 July 2014

Tanzania: Mbatia Cautions Over VAT, Tax Admin Bills

SHADOW Finance Minister James Mbatia (NCCR Mageuzi) has cautioned over hasty implementation of VAT and Tax Administration Bills, which are scheduled for tabling in parliament in November.

"There is a need to conduct thorough preparations and discussions with stakeholders before introducing the new changes.

Hurried execution would bring chaos and mostly likely paralyze the economy," warned Mr Mbatia, who is also a member of the Parliamentary Budget Committee.

He observed that when TRA (Tanzania Revenue Authority) introduced Value Added Tax (VAT) in 1997, it had one year for preparations, including conducting public awareness sessions, adding that this should also be considered for the new bills.

"The new bills would have adverse effects to the economy through introduction of new taxes in the tourism and agriculture sectors as funeral services, among other areas," Mr Mbatia remarked.

He said it is unfortunate that the country is not tapping taxes from sub-sectors as lucrative as fishing in the deep sea of about 230,000 square kilometres, focusing instead on funeral services and expenses.

While the envisaged legislations are likely to slap taxes on processed milk, Mr Mbatia was concerned that the agriculture sub-sector would still lag behind compared to other countries within the East African Community (EAC).

"In Kenya, they process three million litres of milk per day while in Tanzania we process only 150,000 litres. The target of processing 450,000 litres per day is thus unlikely to materialise if the bills are approved and implemented," Mr Mbatia, who is also National Chairman of NCCR-Mageuzi and Nominated MP, said.

On the tourism sector, he was worried that the achievement that the country has recorded to attract more tourists, now at about one million per annum, would be held back.

"Tourism is a very crucial sector of the economy and yet the Bills are likely to introduce more taxes despite the various duties that are presently hounding the sector.

"It should be understood that a single tourist employs about 12 people, four directly and eight indirectly, and hence new taxes would adversely affect revenues and jobs in the sector," Mr Mbatia explained.

He further challenged the government to publicize tax exemptions granted during the past five years and the contributions they had to the economy.

"The government has been quoted saying that the new bills are geared to reduce exemptions among others, okay; but we also want to know who got what and its impact on the economy," he demanded.

The private sector in the country remains anxious since the government announced that the bills, once approved, would become effective on January 1, next year, while the sector wants the new changes to start in July 1, next year.

The Tanzania Private Sector Foundation (TPSF) and Confederation of Tanzania Industries (CTI) have both expressed fears that if the new legislations come into effect next January, they will have negative impact on the private sector.

Although the private sector remains anxious regarding the adverse impacts of introducing the bills in the middle of the fiscal year, the government has assured that it will take all precautions to avoid hurting the country's engine of economic growth.


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