Budget for 2017/2018

CTI: Budget for 2017/2018 Contains Provisions Favouring Industrial Growth but…………………

The Confederation of Tanzania Industries (CTI) says the just passed Budget estimates for the fiscal financial year 2017/2018 contains provisions which favour industrial growth and the national economy at large.

The Government tabled its 2017/18 fiscal year budget estimates to the Parliament and the latter passed it. The budget shows that 62% of the budget (TZS 19.7 trillion) will be for recurrent expenditure, while the remaining 38% (TZS 11.99 trillion) will be dedicated to development.

Generally speaking, CTI commends the Government for presenting a budget which aims at accelerating the pace of economic growth with specific emphasis on industrial development in the country.

One of the features of the 2017/2018 fiscal budget is that the government has reduced the share of the development budget by 2%, from 40% in 2016/17 to 38%.

However, the amount of money set for development projects has increased from 11.8 trillion in 2016/2017 to 11.99 trillion in 2017/2018. It is CTI’s expectation the development budget will be directed to the priority areas such as infrastructure development which has direct link to the revitalization of the industrial sector.

“CTI expressly commends the government’s efforts that aim to increase industrial production and enable the sector to contribute towards economic growth, job creation and poverty alleviation” CTI statement states in part.

The efforts CTI commended include:

• Increasing government revenue and reducing government expenditure.

• Undertaking various projects that will stimulate industrial development.

The CTI Chairman

• Putting more emphasis on the development of the industrial sector which will create more employment and utilize locally produced raw materials.

The private sector is anticipated to play the role of being the engine of growth.

• Increasing quality of education, health services, clean water and power supply

• Fighting against corruption (especially grand corruption) and illegal drug.

• Implementing major reforms in public service customer care and reducing bureaucracy.

• Transforming and strengthening agriculture, livestock and fisheries sectors and promoting local value addition and commercialization.

• Abolishing nuisance taxes affecting efficient conduct of businesses in the country.

Specific measures in the budget estimates which, if implemented, will have positive impact on the manufacturing sector include:

i.Maintaining import duty of 25% and introduction of specific duty of 200 USD per ton whichever is higher on metal and steel products (bars, rods, angles, shapes and sections) used in construction.

The measure aims to protect domestic industries which produce the items.

Tanzania Parliament in one of the budget sessions

ii.Maintaining Excise Duty of shilling 58 per litre on locally produced bottled water.

iii.Granting duty remission on raw materials used for local manufacturers of motor vehicle “air filters”.

iv.Staying application of 10% on hard wheat under HS Code 1001.99.10 and HS Code 1001.99.90.

v.Removing VAT on capital goods in order to reduce the cost of importing machinery and equipment.

vi.Zero rating VAT on the ancillary transport service on transit goods.

The objective is to reduce the transport cost on the cargo passing through Dar es Salaam port.

vii.Removing VAT on compounded animal feeds: This measure will create an equal playing field with informal small industries producing animal feeds.

viii.Reducing corporate tax from 30% to 10% for 5 years for new industrial investment specifically for assemblers of cars, tractors and fishing boats which will start from 1 July 2017. This measure will attract more new investments.

ix.Reducing of excise duty on fruits juices locally produced from shillings 9.50 to 900 per litre.

This measure aims to promote locally produced fruit juices and enhance competitiveness of domestic industries.

x.Reduction of excise duty on wine manufactured by locally produced grapes with 75% local content from shillings 202.00 to 200.00. This measure aims to promote local produced fruit juices and enhance competitiveness of domestic industries.

xi.Grant duty remission of 0 on LABSA (raw material in soap manufacturing),

xii.Removing import duty of 25% or USD 200 per metric ton on steel products used to manufacture leaf springs (Grant duty remission).

xiii.Increasing import duty to 25% or USD 250 per metric ton whichever is higher on flat rolled iron or non-alloy steel. The measure intends to protect domestic industries.

xiv.Increasing import duty of 25% or USD 200 per metric ton whichever is higher on hot rolled angles section to protect domestic industries.

xv.Increase of excise duty on imported bottled water from shillings 58 to 61 per litre, the measure intends to protect local industries.

xvi.Reduction of Produce Cess levied by Municipal Councils from 5% to 3% for cashew crops and from 5% to 2% for the food crops.

xvii.Adjusting/removing various levies and fees charged by Ministries, Regions and independent Government Departments. These changes will be effected in the finance bill of 2017/2018. This

measure will improve business environment and reduce cost of doing business, and

xviii.Removing of TBS inspection fee on cotton, tea, cashew nuts and coffee. The measure intends to reduce cost of production to the industries.

These measures will enable domestic industries to enhance production, improve consumer welfare, promote use of local materials, enhance competitiveness and stimulate economic growth.

However, despite positive measures, the budget estimates have some measures which will impact negatively on industries and the economy at large.

The measures

i.Despite efforts in this budget to widen the tax base, it is still narrow. A narrow tax base coupled by an increase in national budget from TZS 29.5 trillion 2016/2017 to TZS 31.7 trillion implies a huge tax burden to a small fraction of the economy, signaling fears to achieve the plan.

ii.Increasing import duty on Crude Palm Oil (CPO) from 0 to 10% for one year. This measure will add to the cost of production of the palm edible oil and will thus reduce competitiveness of the domestic industries.

iii.Maintaining the extra import duty of 15% on industrial sugar--This measure will increase cost of doing business.

iv.Adjusting excise duty on carbonated soft drinks according to inflation rate of 5% this measure adds to the cost of production.

v.Adjusting excise duty on beer according to the inflation rate of 5%, the measure will affect beer industry due to increase in the cost of doing business.

vi.Increasing excise duty on cigarette with 75% local content by 5%, this measure will reduce the competitiveness of the local industries.

In principle, the increase and introduction of taxes tends to increase production costs and therefore, impact on the competitiveness of domestic industries, and consequent reduction on consumption.

Conclusion

CTI believes that fiscal policies, apart from generating government revenue to fund its recurrent and development expenditure, should also have the responsibility of stimulating the pace of economic growth and job creation.

The 2017/2018 budget has attempted to balance between raising more government revenue on one hand and economic growth on the other.

CTI is optimistic that such good initiatives should be enhanced.

The Confederation is therefore, committed to supporting the positive initiatives announced by the government to ensure success of the National Development Vision 2025 of Tanzania becoming a middle-income country through industrialisation.

The Confederation humbly requests the Government to rectify the negative aspects of the budget as outlined above to facilitate a competitive business environment that is conducive for sound industrial development in the country.

End.