Tuesday, September 15, 2015
Members of the Confederation of Tanzania Industries (CTI) and the Tanzania Revenue Authority (TRA) have agreed to have frequent consultation on issues of mutual interest and benefits for the nation.
Speaking at a one day awareness seminar on the new Value Added Tax Act held at Serena Hotel recently, the Commissioner General of TRA, Mr. Rished Bade said that CTI members were essential partners and that there was a need to have frequent consultative meetings on various pertinent issues."I c ommend the CTI members for being good taxpayers and I understand most of them would be eligible to pay VAT....due to this there is a need to have regular meetings, at least twice in a year during the pre-budget and post-budget sessions in order to get stakeholders' views necessary to formulate appropriate tax policies" Rished Bade said.
He encouraged members of the Confederation to use the seminar as a platform to learn more about the new VAT Act 2014 whose draft started in 2012 and attracted wide recommendations from key stakeholders through consultations. Explaining on the reasons which exacerbated enacting of the Act, Mr. Bade mentioned among other things, broadening the tax base in order to match with
the growth in the Gross Domestic Product (GDP).
"We also aimed at the reduction of numerous exemptions that were distorting the market by creating unfairness as most consumer goods and entities were exempted...... exemptions were reviewed to correspond to the destination principle as a result, the third (3rd) schedule on exemptions has been removed from the new VAT Act and remain with two schedules on Zero Rate and relief" he underscored.
Other reasons were to introduce taxable items such as insurance (with exemption on life and health); consultancy services to be taxable under the VAT Act 2014; and to increase the threshold for VAT registration from TZS 40 million to TZS 100 million which will easy administration of TRA. He said that those businesses falling below the threshold would be provided with appropriate modalities.
He informed also that the other change in the Act is to charge VAT on the procedures for obtaining a deferment for payment of VAT are provided under Section II of the Act. However, earlier in his welcoming remarks, the CTI Chairman Dr. Samuel Nyantahe emphasised on the importance of understanding the new Act to enhance compliance.
He encouraged stakeholders to take the opportunity to present their concerns to TRA with the view to improving the implementation of the Act.
He said that regular meetings and consultations would create a comfortable environment for policy formulation as opposed to last minute discussions that led to unnecessary confrontations at the parliamentary committees instead of consultations and regular meetings.
The CTI members were curious to get clarification on various issues related to the Act. A question was asked on the reasons for the current 90 days period to get tax refund under the New VAT Act, 2014 contrary to the 30 days provided in the previous Act.
Members from the Aviation sector aired their concerns about the awareness and TRA's capacity to administer tax on the aviation sector. They were worried that the introduction of 18 percent tax on services related to the sector such as insurance and leasing charges would result in to increase in costs and further erosion of profitability of the sector by 18 percent.
Other participants wanted clarification on the process of reclaiming VAT charged on imports used to produce goods destined for the EAC market. Representatives from pharmaceuticals expressed concerns on the fact that VAT on inputs to pharmaceuticals which were previously exempted, are no longer zero rated, an act which denies manufacturers from reclaiming VAT on
pharmaceuticals products sold into the market.
Similarly, clarification was sought on exemptions provided under TIC as to whether they would also be exempted from VAT. Also clarification was sought on cotton seeds sold into the market after undergoing ginning process. Responding to the raised oncerns, the officials from TRA led by the Commissioner General said that the 90 days to get refunds included the entire process needed to approve, verdict up to payment of claims.
He informed that contrary to the previous process that required businesses to do some of the activities during the claim process, under the new VAT Act 2014 everything would be done by TRA.
Regarding VAT on services provided to the Aviation Industry, TRA emphasised on the importance of having close relationship with the aviation sector on issues relating to tax administration. However, they noted that spare parts and leasing of aircrafts have been exempted from VAT as a means to reduce cost implications on aircraft operators.
Responding to the question about VAT on imports used to produce goods destined for EAC market, the TRA officials said that duty drawback scheme was in place to enable importers to reclaim VAT on goods intended for the EAC market.
On exemption of VAT on inputs used by pharmaceuticals industry, TRA emphasised on the need to put special consideration for VAT charged on inputs to pharmaceuticals since most inputs were exempted. TRA clarified further that the VAT Act 2014 does not give consideration on capital goods imported under TIC exemptions, saying that only capital goods under EPZA scheme and those used for gas exploration enjoyed exemption.
The TRA officials also underscored that unprocessed products such as cotton seeds were exempted from VAT. But insisted that the process of ginning cotton to separate seeds from cotton remains taxable.
In his closing remarks, the CTI Second Vice-Chairman Mr. Pankaj Kumar applauded TRA for their informative presentation. He however expressed concerns over the challenges facing the pharmaceutical sector as the VAT Act 2014 could result into increased costs of manufacturers by 18 percent. He also advised to have further consultations between CTI, TRA and the Ministry of Finance to address the tax issues as well as numerous pending issues relating to VAT refunds.
He urged TRA to honour the 90 days period provided for in the VAT Act 2014 to provide tax refund.