SafariLands.org: News: Tanzanias Budget highlights 2008/09

REVENUE MEASURES INTRODUCED BY THE FINANCE BILL, 2008:

Note:
All the changes are effective from 1st July 2008 except the zero rating of services added to the VAT zero rated supplies which will be effective from 1st January 2009:

Income Tax:
- The 2% withholding tax on payments for goods and services has been re-introduced but this time it will apply only on payments made by the Government to persons not having a TIN certificate [section 83]. There is however no corresponding amendment to section 86 to reflect the Minister's statement and the objects clause that such withholding tax will be final.

- Tax burden shifted to agents who fail to pay tax specified in the agency notice within 30 days of service of the notice or upon the principal's money coming into the agent's possession or becoming due to him whichever is the latter and the agent has not given a notice to the Commissioner on his inability to comply with the notice or on refusal of his notification by the Commissioner [section 117].

- Powers of the Commissioner to compound offences decentralized [section 127]. Such powers may now be delegated to other TRA officers.

- The individual taxable income threshold raised to shs. 100,000/= per month and the rate of tax in the lowest band remains at 15% [First Schedule]. Other bands have been adjusted proportionately. The objective of this amendment is to streamline the tax rates with the rise in Government minimum wage and also to increase the purchasing power of the employees.

Income per month (shs.) ----- Tax payable (shs.)
Not exceeding 100,000/= ---> NIL
Exceeding 100,000/= but not exceeding 360,000/= ------> 15% of the amount in excess of shs. 100,000/=
Exceeding 360,000/= but not exceeding 540,000/= Shs. 39,000/= plus -----> 20% of the amount in excess of shs. 360,000/=
Exceeding 540,000/= but not exceeding 720,000/= Shs. 75,000/= plus -----> 25% of the amount in excess of shs. 540,000/=
Exceeding 720,000/= Shs. 120,000/= -----> plus 30% of the amount in excess of shs. 720,000/=

- Minimum turnover tax, known as alternative minimum tax introduced for corporations registering tax losses for 3 consecutive years and the tax will be charged at the rate of 0.3% of annual turnover of the third and subsequent years [First Schedule]. This requirement applies only to corporations registering such losses because of tax incentives on investments. Other corporations registering tax losses due to factors other than fiscal investment incentives are not affected by this rule.

- Capital gains on redemption of vipande (units) in approved collective investment schemes exempted from income tax [Second Schedule]. Note that the phrase used in the Finance Bill is “redemption” while the Budget speech uses the phrase "sale". The objective is to give similar exemption to transactions in units as is the case with investments in listed equity or bonds.

Value Added Tax:
- The list of zero rated services expanded effective from 1st January 2009 to include services connected to immovable property located outside Tanzania such as leasing, estate management, construction, architectural and supervision services; intermediary or agency services for transactions conducted outside Tanzania; professional (such as engineers, lawyers, accountants and similar services) and consultancy services rendered to a person (other than related persons) and business outside Tanzania; telecommunication, radio and television services to audience outside Tanzania; and ancillary transport activities (loading, unloading, handling and similar services) physically carried outside Tanzania. Zero rating of locally produced sacks for packing imported bulk agricultural produce has been mentioned in the Budget speech but it does not appear in the Finance Bill.

- The list of exempt supplies expanded to include bitumen, burning jelly (moto poa) and natural gas (CNG and CNG cylinders). The objective is to afford a cheaper source of energy and discourage the use of charcoal to preserve our forests. Exemption of bitumen will also help to reduce road construction costs.

- The list of Special Reliefs expanded to include importation by Moto Poa Ltd of ethanol, dyestuff and thickening agent for manufacturing burning jelly.

- The following items have been deleted from the list of special reliefs: organizations holding special agreements or MOUs with the Government providing from relief from taxation (item 11); companies engaged in the Songo Songo project 9item 17); packing materials to registered milk processors or manufacturers (item 20) and supplies to registered pharmaceuticals for manufacturing human medicine (item 22).

- Strict conditions now attached to special reliefs granted to religious and charitable CBOs and NGOs to require them to give account and proof of the utilization of the relieved goods and services and to submit detailed annual project plans to TRA.

Excise Duty:
- Excise duty on heavy furnace oil (HFO) reduced from shs. 117/= per litre to shs. 97/= per litre to help local industries to reduce production costs and make local products competitive in the market.
- Excise duty on motor vehicles adjusted by removing duty on small cars with less than 1000cc and reducing the duty payable on medium size vehicles with less than 2000cc to 5%. Duty on vehicles with more than 2000 fixed at 10%.
- Excise duty on mobile phone services increased from 7% to 10%.
- The annual inflation adjustment of duty has been effected by increasing by 12% the excise duty on the traditional dutiable items, namely, soft drinks, beer, wines and spirits, cigarettes and tobacco, and petroleum products.

Vehicle Registration and Transfer Tax:
- Registration tax on motor vehicles (on which VAT has been paid or exempted) increased from shs. 90,000/= to shs. 120,000/=. Registration tax on other vehicles has not changed.
- Registration tax on motor cycles now fixed at shs. 35,000/=. However, the provision which provides for registration tax of a motor cycle of 15% of the value of the motor vehicle has not been deleted. It is hoped that the anomaly will be rectified in the final print of the Finance Act; otherwise, there will be two rates of tax in respect of the same subject.

Road Licences:
Reduced substantially following public outcry after last year’s budget. The new road licenses (with old rates in brackets) are as follows:

VEHICLE ENGINE CAPACITY - ROAD LICENCE FEES (SHS.)
- Less than 500cc ------> 30,000/= (50,000/=)
- Exceeding 500cc but less than 1,500cc -----> 50,000/= (80,000/=)
- Exceeding 1,500cc but less than 2,500cc ----> 120,000/= (150,000/=)
- Exceeding 2,500cc but less than 5,000cc ----> 140,000/= (330,000/=)
- Over 5,000cc -----> 150,000/= (175,000/=)
- Tractors used for agriculture -----> NIL

Import Duty:
Common External Tariff rates discussed and agreed with EAC Partner States as follows:
- Hand hoes and other agricultural implements exempted from duty in order reduce costs to the farmers, especially peasants.
- Removed duty on imports by TANELEC for manufacturing transformers and switchgears.
- Removed duty on data processing machines.
- Removed duty on up to 20,000 metric tons of barley to be imported by Tanzanian brewery companies by December 2009.
- Vehicles designed for garbage collection by local authorities or their authorized agents exempt from import duty.
- Removed duty on crude palm oil in order to put domestic industries in equal footing with their counterparts in the region.
- Import duty on sodium sulphate reduced from 25% to 10%.

Contributions by Institutions, Government Agencies and Regulatory Authorities to the Government coffers:
- There is a new feature in this year's Finance Bill whereby certain public institutions and regulatory authorities will now be required to contribute to the Exchequer such sums as may be determined through consultations between the parent Ministry and the Ministry of Finance ''

These authorities are:
- the Public Procurement Authority;
- the Energy and Water Utilities Regulatory Authority;
- the Ports Authority;
- the Tanzania Civil Aviation Authority;
- the Tanzania Food, Drugs and Cosmetics Authority;
- the Tanzania Communications Regulatory Authority; and the Surface and Marine Transport Regulatory Authority.