8 August 2017

Tanzania: Amend VAT Law, JPM Orders

President John Magufuli has directed the office of the Attorney General (AG) and other responsible ministries to speed up the amendment of Value Added Tax Act 2015, saying it is slowing down development projects.

Speaking at the newly inaugurated 4bn/- modern Korogwe bus stand in Tanga Region yesterday, the Head of State said it was irrational to impose VAT on everything, especially soft loans and grants.

"In 2015, we made amendments that lead to imposition of VAT on everything. These changes have affected us immensely. When we negotiated with the World Bank (WB) on this project (Korogwe Bus Stand) the amendment hadn't been effected.

"I have directed the AG, Regional Administration and Local Government and other responsible ministries to fasttrack the amendment of the section of the VAT Act during next month's Parliamentary session," Dr Magufuli said.

He pointed out that when VAT was imposed on development projects funded under soft loans or grants from development partners, the government suffers immensely because it has to raise money to pay the tax.

After government manages to raise the amount for VAT, President Magufuli explained, some unfaithful contractors renegotiate with Tanzania Revenue Authority (TRA) to pay only 40 per cent of the tax.

He explained, furthermore, that under the circularity system involving the Finance Ministry, the funder, and taxman who seizes goods at the port, work on development projects is slowed down and original completion deadlines were not met.

"That is why I have directed the Minister of Works, Transport and Communications, and his counterparts in charge of Finance, to make sure that the seized materials for the Dar es Salaam-Morogoro Standard Gauge Railway (SGR) should be released soon as we await the amendment," the President added.

Dr Magufuli said the current WB projects, which are undertaken under the 'soft loans' system do not deserve to be taxed because the VAT can be utilised elsewhere, adding, "Yes, we need VAT but not from everything because this slows down development."

He pointed out, for instance, that an X-ray machine donated for serving wananchi could be seized at the port as the Taxman would demand VAT. while patients would be suffering in hospitals.

"The donors give you something for free, and then you demand that they pay tax... this is sheer nonsense," said the President, as he stressed the need for amendment of the 2015 VAT Act.

Meanwhile, Dr Magufuli has ordered two engineering companies Don Consult Ltd and Tansmo Contractors to resume construction of a water dam in Handeni within the next two weeks at their own costs or refund the 2.8bn/- of public funds they had already been paid.

If the deadline was not met, he stated categorically, security organs in the region should arrest their officials. The President's remarks were among the highlights of a public rally he addressed in Handeni, Tanga Region en route to Dar es Salaam.

He added: "They should choose between going back to the site and going to prison. The regional administration should oversee this matter." He further remarked that the engineers must push the work to an adequately satisfactory level to deserve payment of the 1.2bn/- balance.

He explained that work on the 4.1bn/- project embracing water supply dams in Mkata, Namanga and Kwadungwa, for which the contractor had already pocketed 2.8bn/- was shoddy and didn't match the amount.

"Those who facilitated the payments are probably enjoying the percentages they received from these companies. The boil-lancing expert has come," Dr Magufuli announced amid cheers, reiterating that his government won't tolerate to see public funds being misappropriated.

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