Tanzanians will once again receive formal information today regarding the type of budget they will have for 2024/25 from Dr Mwigulu Lameck Nchemba, the Minister for Finance.
Since the budget is presented every year, I anticipate that many Tanzanians will be more interested in learning about the government's objectives and the sources of financing for various development programmes, where some analysts will compare the budget from last year with the estimates that Tanzanians are going to get for 2024/25 budget Let's first review the amendments proposed in the 2023/24 budget to determine whether the modifications are fruitful to the economy.
This will give us a better idea of what to expect from the Minister of Finance's national budget speech to be presented today.
Dr Nchemba, then Minister for Finance and Planning, tabled the budget on June 15, 2023, with the theme, 'Accelerating Economic Recovery, Climate Change Adaptation and Mitigation and Enhancing Productive Sectors for Improved Livelihood'.
The main proposed measures in the national budget speech of the previous year included, among other things, changing the EFD penalty to 3.0m/- or 20 per cent of the tax if fiscalised invoices or receipts are not issued and removing local share issuance and transfer transactions from the purview of section 56 of the Income Tax Act.
The budget also included a reduction in tax on gross gaming revenue from 25 per cent to 18 per cent for operations at the Forty Machines Site and an explanation of the income tax exemption for internal restructuring of mining firms by framework agreements.
The budget also increased the yearly VAT threshold from 100m/- to 200m/- and decreased the Skills Development Levy from 4.0 per cent to 3.5 per cent. Beyond the macroeconomic policy targets, the national budget for the previous year was carefully crafted with a focus on the larger picture of the economy.
These targets included an estimated 5.2 per cent real GDP growth, controlling inflation in the medium term to a single-digit range between 3.0 per cent and 7.0 per cent, achieving 14.9 per cent annual domestic revenue collection and 12 per cent yearly tax revenue collection, an estimated budget deficit of less than 3.0 per cent of the GDP.
And, above all--maintaining foreign reserves large enough to cover at least four months of importation. Here is a quick summary of the many components that were part of the budget from the previous year.
In terms of tax measures, in addition, a proposal was also made to increase the penalty for neglecting to request an EFD receipt to 30,000/-, which would equal 20 per cent of the tax evaded.
Depending on how the Tax Administration Act, CAP 438 (TAA), was intended to be phrased, using the term evasion could have made it more difficult to implement specific requirements if an EFD was accidentally not issued. It will be a good idea for Tanzanians to be told how this proposal fared and whether it was successful or ineffective.
Regarding income tax, a proposal was made to exempt local transactions involving issuing or transferring shares from section 56 of the Income Tax Act, CAP 332 (ITA).
The purpose of this modification was to eliminate direct transfers of local firm shares as they were already subject to section 90 of the ITA's taxation.
Additionally, a suggestion regarding the internal reorganisation of mining corporations was made, which included an exemption for such restructuring by framework agreements signed with the government.
Regarding the national budget for 2024/25, how successful have the proposed amendments been in raising the national income tax thus far? An amendment was also made to broaden the tax base by introducing a 10 per cent income tax on individuals who dispose land without providing proof of costs incurred.
Previously, the tax base was 10 per cent of gains realised, but it was proposed to be 3.0 per cent of the appraised land value.
In this line, a proposal was also made about the people's withholding responsibility, which was implemented in July 2022 to exclude individuals from the need to withhold tax on rental income for non-commercial properties--such as residential properties.
Regarding the transport industry, a suggestion was also made to modify Section 65 and the Second Schedule to the ITA, replacing them with a more straightforward method of calculating income tax obligations for those operating a transport firm with a turnover of less than 100m/-.
Additionally, a 2.0 per cent income tax was introduced for artisanal and small miners on payments made to ASMs with the expectation that this tax would be withheld.
To what degree have these and other proposals, such as the one exempting dividends and interest earned by the National Health Investment Insurance Fund (NHIF) from income tax, contributed to improving national finances?
Will the budget that we hear about today address these issues, and will we know whether the execution has been successful or not?
The Minister revised the Value Added Tax Act, CAP 148 (VAT Act), in last year's national budget. The amendment raised the VAT registration threshold to 200m/- (87,000 US dollars) with a progressive increase to 500m/-.
Because the threshold for VAT registration in 2023 was 100m/-.
I believe this was a positive step towards increasing the effectiveness of tax administration.
Additional changes included extending the VAT deferment on capital goods to locally manufactured capital goods (previously only applicable to imported ones) and implementing zero rating, which would have applied 0 per cent VAT for a year to textile products made with locally produced cotton and fertiliser.
The Excise (Management and Tariff) Act, CAP 147, has provisions under section 124(2) that the Minister proposed to amend.
These provisions include raising the specific (non-ad valorem) duty rates by 10 per cent, except wines, spirits and confectionery products made domestically; exempting electric non-utility vehicles with only an electric motor for propulsion from engine capacity; and exempting compressed natural gas (CNG) vehicles.
Other tax measures included in the previous year's budget overturned the National Payment System Act and the Electronic and Postal Communications Act.
These measures included eliminating the daily charge levied on each SIM card based on users' capacity to recharge the balance, raising the tax on withdrawals by 50 per cent, and eliminating the tax on electronic money transfers.
Also, actions were taken in response to the Mining Act's exemption of refineries from paying the 1.0 per cent inspection charge. Immigration Act, CAP 54 permits non-residents to apply for a Class B Residency Permit provided they have invested at least 150,000 US dollars in buying a home within the nation.
Land Rent Act, CAP 113 to eliminate the 20,000/- fee for the deed plan; lower the premium charge from 0.5 per cent of the land value to 0.25 per cent; reduce the Certificate of Occupancy fees from 50,000/- to 25,000/- per certificate; lower the registration fees from 20 per cent to 10 per cent of land rent; and amend the Land Act (Cap. 113) to designate the director of the council as the authority responsible for collecting land rent on behalf of the Ministry of Land, Housing, and Human Settlements Development and lowering of tourism business fees for lodging establishments owned by Tanzanians from 2,000 US dollars to 1,000 US dollars for five-star hotels and the same to four-star hotels and retain the same amount of 1,000 US dollars for three, two and one-star hotels.
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Those who have been studying the national budgets will concur with me that the responsible Minister's suggestions in last year's budget essentially, with prioritisation, realised the vision of Accelerating Economic Recovery that enhanced productive sectors for the improved livelihood of most Tanzanians.
The question that needs to be posed, though, is whether the budget for 2024/25 will continue to provide Tanzanians of all walks of life, especially those in the tourism sector, financial sector, energy and utility sector, telecommunication, manufacturing and tourism and agriculture sector to mention a few with consolation and hope by laying the groundwork for a booming economy or will it make promoters in these sectors wonder on what will the budget mean to their occupational?
For instance, what will this year's national budget impact have on the manufacturing sector that is highly susceptible to changes in fiscal policy, particularly excise duty charges, which is a significant tax revenue contributor, employment creator and creation of the multiplier effects across of various value chain going to expect?
This year's budgetary estimates are anticipated to promote economic growth, uphold financially sound priority projects and encourage a competitive, inclusive economy that will improve food security, advance development programmes and promote trade competitively.
Will there be additional changes to the 2024/25 budget's budgetary proposal compared to 2023/24?
What would the modifications entail, and what would the consequences be?
Shayo holds a PhD in Economics. He is Daily News columnist.
