14 September 2017

Tanzania: Six Soft-Drink Makers Yet to Get Sh25 Billion in Tax Refunds

Dar es Salaam — The government is yet to refund Sh25 billion in refundable additional import duty on sugar to six major soft-drink makers, The Citizen has learnt as manufacturers grapple with the implementation of recent tax laws.

During the 2015/16 financial year, the government increased the import duty for sugar to $460 per tonne of the CIF value of the imported product.

It said the aim was to protect local sugar manufacturers from imports.

Initially, importers of industrial sugar were being charged 10 per cent duty but the government - through the 2015/16 budget - raised it to 25 per cent.

The agreement was that 15 per cent would be refunded as soon as the government was convinced that the sugar was indeed imported for industrial production.

The move aimed at preventing people from importing industrial sugar and diverting it for domestic use.

Although the arrangement started well, things went awry during the past one year or so, with six major importers of the product, including Coca-Cola Kwanza, SBC Tanzania (Pepsi), Bakhresa Food Products, Nyanza Bottling Company and Bonite Bottlers Ltd, saying they are yet to be paid up to Sh25 billion in tax refunds.

"It is unfortunate that it is almost one year now since we started complaining about poor refunds and nothing seems to be moving," the Confederation of Tanzania Industries (CTI) first vice chairman, Mr Jayesh Shah, told The Citizen on the sidelines of the group's breakfast meeting together with the Tanzania Revenue Authority (TRA) commissioner general, Mr Charles Kichere.

Manufacturers believe that the move goes contrary to the government's goal of promoting industrialisation.

"The government should speed up the process of refunding... it should at least take two months," opined Mr Shah.

Manufacturers believe that the tax should be reduced to 10 per cent from the current 25 if the country is to walk the talk with regard to industrializing the country.

According to the director of corporate affairs at Bakhresa Group, Mr Hussein Sufian, the 15 per cent refundable import duty was constraining the company's cash flow.

"This increases the cost of doing business. In manufacturing, we use borrowed funds and therefore, delays in refunds are disservice to us," said Mr Sufian.

All East Africa beverage producers are against the policy, since it hurts industrial sugar users and benefit foreign sugar producers.

Mr Sufian alleged that the government was delaying to refund them due to some unscrupulous manufacturers who were using industrial sugar as final products and not raw materials.

"But why should we suffer because of a few people? Why don't you select those who mess up and punish them," he queried.

Reacting to the issue, Mr Kichere said the government's audit on the amount of industrial sugar that actually went into manufacturing against the one that was diverted into normal consumption was in final stages.

He insisted that the manufacturers' funds were safe in the escrow account pending completion of the auditing exercise.

He however called upon CTI to ensure that its members utilize industrial sugar for the intended purposes as a way of reducing the time that the taxman takes to audit the imports.

'Finally, my team and I are more than willing to welcome you to our offices so we can talk on the best way to deal with your issues so we can jointly play our various roles in industrailising this nation... ..we are also willing to come to your offices and see how you conduct your undertakings," he said.

Experts believe that timely payment of refunds to companies is a legal obligation of the state. Thus, there is no excuse for delaying, according to him.

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