Dr. Philip Mpango, Minister for Finance and Planning
The Confederation of Tanzania Industries (CTI) has asked the government to remove Excise Duty on articles for conveyance or plastic packaging goods, including lids, caps and closures of plastics in order increase competitiveness of domestic industry through reduced cost of raw materials.
The request contains in a list of CTI’s budget proposals for year 2016/17 which was submitted to the task force on tax reform recently for consideration.
Before every new budget is presented to the parliament for discussion and approval, the government has been seeking tax reform proposals from stakeholders in different sectors of the economy including manufacturers, with a view to streamline tax regime as well putting in place taxes which is friendly for stimulation of the economy.
Currently the conveyance or plastic packaging goods, including lids, caps and closures of plastics attract an Excess Duty of 50% which in the view of the manufacturers increases the cost of production for local food packaging industries on one hand, while decreased their competitiveness. The duty also discourages investment in production of products for packaging as it encouraged influx of packaging materials from foreign markets.
Other proposals include but not limited to:-
- Reduce Excise Duty on printed packaging material (HS. 3920.10.00) from 50% to 0% to among other thingspromote domestic industries that have invested heavily in machinery; as printed packaging materials are intermediate materials used in packaging; and for promotion of competiveness of domestic products against imported products.
- Reduce excise duty on cosmetics HS. 3303, 3304, 3305, 3306 and 3307 from 10% to 0% to increase sales’ volume of up to 8,100 tons which enable the Government to increased government revenue from TZS 13 billion collected in 2015 to about TZS 17.1 billion with reduced duty on cosmetics. This will also promote competitiveness of domestic industries since Kenya has a zero percent Excise on the same products
- Maintain the current Excise Duty on carbonated soft drinks and water to promote production and sales volumes which could increase Government revenue in form of VAT. The reduction in Duty on soda in 2014/15 and maintaining the duty in 2015/16 Pepsi was able to lower its retail prices from TZS 600 to TZS 500 while Coca Cola maintained its prices on soda. This would further promote investment and growth in the domestic industry. The reduction of Excise Duty from TZS 91/Lt to TZS 55/Lt and maintaining the duty in 2015/16 helped the industry to grow and reduce prices therefore, invest a total of USD 110 Million for the financial year 2014/15.
- Retain current Excise Duty rate on tobacco and tobacco products as well as the current 3-tier Excise Duty structure with its 75% domestic tobacco requirement since these measures enhances competitiveness, extra tax revenue of up to TZS 10 billion per annum, boosts capacity utilization, increase investment, sustain/increase jobs, encourage use of locally available raw materials and domestic value addition, and is also encourage inward investment and industrialization.
- Hold current Excise Duty Rates on Beer & Spirits to stabilize and grow the industry. Any future rates increases if any should be below the inflation rate. Also products using 100% local raw materials, malted or unmalted, should be treated the same by HS. 2206.00.30, with regard to Excise Tax Remission. Beer with 0% alcohol should use Carbonated Soft Drinks Excise Duty Rates while Beer with up to 2% alcohol to should use 50% of beer Excise Duty Rates. Spirits with up to 7% alcohol to use Beer Excise Duty Rates
- Introduce a 25% Excise Duty or a specific duty of USD 200/ton on imported tempered/toughened glass products whichever is higher. These measures will increase government revenue from production and taxation of profit while promotes glass making industries in Tanzania.
- Reduce import duty on Base oil for lube HS. 2710.19.10 from 10% to 0%. Base oil is a basic raw material which increases capacity utilisation of the firm from the current 23,200 tons of lubricants to 67,000 tons. Also reduce importation of lubricants to a tune of 11,800 tons of imports thus, save foreign exchange equivalent to the tune of TZS 5.4 Billion. Encourage industrialisation in the domestic industry to increase the industry’s current employment of about 200 employees, some ofwhich may lose jobs as the industry tries to cut their production costs
- Remove upfront payment on imported industrial sugar or introduce Bond. This will promote competitiveness of domestic industries that are currently faced with huge cash flow problems. Introduction of additional 15% upfront payment does not address the problem of illicit trade of industrial sugar as other EAC countries are charging 10% Import Duty thus charging an additional 15% import Duty confers an unfair advantage against domestic manufacturers.
- Contrary, the upfront payment of 15% has serious cash flow problems to domestic manufacturing as it ties down their working capital. Currently, domestic manufacturers have paid TZS 11 billion which needs to be refunded by TRA.
- On cross-cutting issues, reduce SDL from 5 to 2 percent; Railway development Levy from 1.5 to 0.5 percent; reduce the maximum tax bracket rate from 30 to 25 percent; corporate tax on non-listed companies from 30 to 25 percent and capital gain tax for initial public offer share from 30 to 15 percent.
The above measures will enhance, among other things, employment creation; help reduce the cost of importing intermediate inputs and raw materials thereby making the domestic industry competitive; promote savings and investment necessary to improve welfare of Tanzanians; Promote a level playing field among domestic companies and Promote investments as the cost of funds become cheap and companies grow as well as increase government revenue through corporate tax.