5 December 2017

Tanzania: Mbeya City to Reduce Service Levy By 60%

MBEYA City is set to reduce service levy by two-third as most businesses are not complying while some cannot afford paying.

The city fathers and Mbeya traders under Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA) have mutually agreed to slash the service levy from 0.3 per cent to 0.1 per cent.

According to the statement issued by TCCIA in Mbeya region, only 18 percent of more than 12,000 licensed businesses have been paying the levy in Mbeya city. The statement explains that most of new start-ups businesses are owned by women and youth who are incapable to pay the said levy.

IT is all smiles for the Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA) and traders in Mbeya city after the authority agreed to slash the service levy from 0.3 per cent to 0.1 per cent.

This follows the fact that merely 18 per cent of 12,000 traders are paying the current 0.3 per cent levy with majority petty traders lacking the ability to pay due to low returns. Mbeya city Deputy Mayor Fanuel Kyanula said his office supports the proposal to cut the service levy to 0.1 per cent saying it will increase revenue collection as more MSMEs will be willing to pay the reduced rates.

"The review of this bylaw should go hand in hand with education on the importance of paying the service levy," he said. Mbeya City acting Director Afrael Manase said the move to reduce the levy has been done on time.

"This public-private dialogue on the Service Levy comes at the right time. It is a win-win for business and government," Mr Manase said after the meeting. He said Mbeya City was looking for ways to address the shortfall in much needed revenue.

Mbeya's TCCIA said in a statement that the percentage of those paying the levy explained the necessity to reduce the tax that has a merely 18 per cent compliance. The statement explains that most of new start-up businesses are owned by women and youth who are incapable of paying the levy.

TCCIA Chairman Dr Lwitiko Mwakalukwa said the chamber believed that more than 80 per cent of businesses in Mbeya are shying away from paying the 0.3 per cent service levy to the Mbeya City Council. TCCIA said once the levy is lowered to 0.1 per cent, which is 60 per cent reduction; the chamber will embark on sensitisation campaign.

"A 60 per cent cut [or 0.1 new rate] is an ideal and much more affordable [rate] to businesses," Mr Mwakalukwa said. Under the Local Government Finance Act, Local Government Authority (LGA) entitled to charge 0.3 per cent service levy based on turnover generated.

In 2011, Mbeya city passed a by-law that enabled the authority to implement the Act. However, few years later, the authority has agreed to lower the levy following arguments and concerns raised by TCCIA and traders in the area.

The resolution to reduce the service levy is a proposal that came out of a Public Private Dialogue that was co-chaired by Mbeya TCCIA Executive Officer Emile Malinza, Mr Manase, and Mr Kyanula and supported by the USAID/ Tanzania Feed the Future Enabling Growth through Investment and Enterprise Programme (ENGINE).

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