8 June 2017

Tanzania: Cut Regulatory Fees, Say Soft-Drink Producers

Photo: The Citizen
Soft-drink producers - They include the import duty (10 per cent), additional 15 per cent refundable, sugar levy at $6 per tonne, wharfage and railway development levy.

Dar es Salaam — Soft-drink producers have called on the government to reduce multiple regulatory fees in its 2017/18 budget.

They include the import duty (10 per cent), additional 15 per cent refundable, sugar levy at $6 per tonne, wharfage and railway development levy.

The Tanzania Bureau of Standards as well as the Tanzania Food and Drugs Authority also charge soft-drink makers.

There are also Kilimo, automatic energy, customs processing and corridor charges.

Over the past four years, soft drink industry invested more than $400 million (about Sh850 billion), according to the Confederation of Tanzania Industries (CTI).

It created that 11,000 jobs,1, 000 of them direct and the rest indirect have been created.

"The investment needs to be protected," noted CTI's document titled 'Proposals to the Tax Force on Tax Reform for 2017/18'.

It explains how the tax burden has been harming the industry and is likely to reduce government revenues.

A senior soft-drink company official warns that high operational costs, caused by overtaxation, were seriously threatening firms, with sales volumes likely to fall.

"A small change in price results in a huge decrease in sales volumes. When prices rise consumers tend to shift to low quality similar drinks."

To maintain growth and government revenue collections, according to him, the industry has over the past three to four years decreased prices.

The government can get more VAT, corporate tax and other taxes if the industry grows.

According to a source all of 15 Southern African Development Community members, except Tanzania and Angola, have removed excise on soft drinks. Tanzania and Angola have excise duties of 10 and three per cent respectively.

However, CTI applauded the government's move for reducing the duty from Sh91/litre to 55/ litre in 2014/15. The reduction enabled producers to invest $110,000 (Sh240 billion) in Mbeya, Mwanza, Moshi and Dar es Salaam.

According to CTI, these investments created 44,000 jobs - 400 direct and 4,000 indirect. The reduction excise duty enabled the industry to pass on benefits to consumers by reducing prices of drinks, it said.

Economics professor Samuel Wangwe told The Citizen that multiple charges could limit revenue growth and profitability.

"High operational costs eat into the working capital which in turn it adversely affects the business performance."

He added that, if there was a straight forward tax administrative system, industrial players would not be spending much time dealing with regulatory bodies.

His sentiment was echoed by business expert Donath Olomi, who called on the government to simplify the tax system.

Dr Olomi warned that soft-drink makers risk losing ground to regions that have been aggressively structuring their corporate tax regimes to attract investment, jobs and innovation.

He urged the government to introduce some incentives to avoid the country becoming increasingly uncompetitive as an investment destination.

"If our company tax regime becomes too uncompetitive, investment and growth will be eroded," Dr Olomi said.

"This in turn will have a direct impact on government revenues and the country's capacity to provide the services and standard of living we currently enjoy."

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