8 December 2017

Tanzania: Local Revenue Key As Foreign Funds Dry Up

Dodoma — Shrinking revenue from development partners is forcing the government to turn to domestic sources to boost collections, a cabinet minister has said.

The minister for Finance and Planning, Dr Philip Mpango, said here that foreign loans and grants have been shrinking over time creating revenue stress in implementing the country's budget, mainly financing development projects.

According to him, foreign grants shrunk to Sh495 billion during the financial year 2016/17 from Sh1.5 trillion recorded during the financial year 2014/15.

Foreign loans have also been affected, with Dr Mpango highlighting that during the financial year 2016/17, Tanzania received only Sh1.23 trillion, lower than Sh1.25 trillion received during the financial year 2013/14.

The central bank's Monthly Economic Review for October, which was published last week, indicate that foreign grant fell to Sh21.8 billion in September this year from Sh194 billion recorded during a similar month last year.

Speaking during a roundtable with members of the business community here on Wednesday, Dr Mpango said the government has proposed the new tax system which will mitigate the effects of shrinking foreign revenue, both loans and grants.

"I do not want to see the new tax system hindering our effort to move Tanzanian economy to semi-industrial level," he said.

Representative of the private sector who spoke during the dialogue said the government must revisit the electronic tax system, in beverage industry to avoid more burdens to consumers.

Serengeti Breweries Limited managing director Helene Weesie argued that the new electronic tax system was not proper as it would increase the burden on consumers.

"Beverage makers including soft drinks, water and soda have been informed by the Tanzania Revenue Authority (TRA) to start using Electronic Tax System (ETC) but Tanzania is not integrated into such system, so there is a need for more dialogue with the government," she commented.

She said manufacturers of such products fear that the adoption of the new system will result into loss of government revenue, especially from products which are exported," she said.

PricewaterhouseCoopers representative David Tarimo advised the government to reduce number of taxes for industries to increase their competitiveness.

"Many taxes will cause Tanzanian-made products more expensive, which reduces their competitiveness in both local and foreign markets," he said.

Confederation of Tanzania Industries (CTI) chairman Simon Nyantahe stressed the importance of dialogue between government and private sector in order to solve various challenges facing private sector.

"There should be tax exemptions for local investors to increase their capacity," he suggested.

The dialogue was held to collect views of business community on the changed tax system which was aimed at improving the budgetary policy for the coming financial year with the aim of creating conducive environment towards industrial economy by 2025.


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