16 May 2016

Tanzania: Bigger Tax Burden Beckons in the 2016/17 Financial Year

Dodoma — A huge tax burden is lurking in the shadows and may affect Tanzanians adversely during the next financial year, due to what critics within and outside Parliament claim is the consequence of the government's failure to tap onto new potential revenue sources.

Unless the government moves fast to diversify the sources, they say, continuous reliance on the traditional ones to raise Sh15.1 trillion to finance the 2016/17 Budget will be an uphill task.

The 'Financial Statement and Revenue Estimates' submitted to the National Assembly by the government points to increments in some taxes which will enable the Tanzania Revenue Authority (TRA) to meet its projected collection target of Sh15.1 trillion for the next Budget.

TRA has set for itself the ambitious goal of exceeding by almost 22 per cent in 2016/17, the projected Sh12.3 trillion collection for the financial year that is nearly ending , through the same sources.

Outspoken Kigoma Urban MP Zitto Kabwe (ACT-Wazalendo) says the government's failure to widen the tax base is very shameful.

"Many years have passed since the Chenge Report was submitted to the government, but it does not seem to appreciate its contents.

The Chenge Report was the culmination of an assignment undertaken by a committee formed by Speaker Anne Makinda, and led by Bariadi East MP John Chenge.

Its thrust included a review of prevailing revenue sources and proposals for new ones that would not be too burdensome to low-income earners.

"The Chenge Report would have helped the government to boost revenue collections, and reduce the need for raising taxes as a means of collecting more money," Mr Kabwe said.

People who are likely to be affected by the new budget include fuel consumers, importers, salaried employees and bank borrowers, since they are associated with areas with the potential to generate more revenue during the next financial year.

Experts are quick to point out, though, that taxes will not necessarily be increased in the areas, but they should nonetheless be the focus of attention when Finance Minister Philip Mpango tables his maiden Budget next month.

The government expects to increase revenue from excise duty on petroleum imports from Sh725.3 billion in the current financial year to Sh825.8 billion during the next Budget, according to a copy of the 'Financial Statement and Revenue Estimates' obtained by The Citizen. Revenue from fuel levy is also projected to increase from Sh718.3 billion to Sh831.03 billion.

It also seeks to improve revenue through Pay as You Earn (PAYE) from government employees from Sh125.9 billion to Sh170.3 billion, while the contribution of private sector employees is expected to rise from Sh428.3 billion to Sh611.3 billion.

"Considering the current movement to reduce taxes on employees, the improvement may be a result of the increase in the number of workers and their respective salaries," says Prof Samwel Wangwe, a distinguished economist.

"Details of whether the tax will increase or otherwise may be well explained by the budget officials but I don't think the government will increase tax on things like fuel... may be it will improve due to increased consumers," he says.

Excise duty on imports is projected to increase from Sh960.5 billion in the current financial year's estimates to Sh1.34 trillion, while that of vehicles alone will more than double from Sh7.01 billion to Sh15.9 billion.

The government also seeks to increase revenue generated by withholding tax on bank interest from Sh2.7 billion to Sh16.4 billion. Air passengers may be affected this year as the taxman projects to collect Sh5.5 billion from airport departure charges to be collected by the Large Taxpayers Department.

Tanzania

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