CTI PRESS STATEMENT ON GOVERNMENT BUDGET 2020/21 SPEECH
MONDAY, 15th JUNE 2020.
The Confederation of Tanzania Industries (CTI) commends the Government for delivering a progressive national budget for 2020/21 financial year that balances between acquiring more government revenue and putting in place measures geared at stimulating economic growth.
CTI wishes to assure the government of its commitment to continue supporting the government in ensuring success towards achieving the government’s vision of attaining middle-income economic status by 2025.
The budget aims to achieve a wide range of objectives including: Maintaining a stable and predictable tax structure; promoting economic growth in the industrial sector; increasing employee’s income; increasing the availability of medical equipment for fighting the COVID-19 pandemic and improving the business environment by abolishing or reducing some of the levies and fees as per the recommendations of the Blueprint for Regulatory Reforms. All these objectives will favourably impact the development of industries and for that reason CTI wish to express its appreciation to the Government.
According to 2020/21 budget speech, read by the Minister for Finance and Planning, Hon. Dr. Philip I. Mpango (MP), on Thursday, 11th June 2020, a total of 34.88 trillion shillings will be mobilized and spent, which is an increase of TZS 1.77 trillion or 5% compared to the budget estimates of TZS 33.11 trillion for fiscal year 2019/20. This increase is an indication of the continued efforts by the Fifth Phase Government to set achievable plans.
Revenue from local sources is estimated at 24.07 trillion shillings, equivalent to 69.0 percent of the total budget. The Government plans to collect tax revenue amounting to 20.33 trillion shillings, non-tax revenue 2.92 trillion shillings and revenue from LGAs own sources 815.0 billion shillings. The government has made it clear that it will not reduce the financing of the development projects which are critical for industrialization.
2.0 Achievement of the 5th Phase Government relating to industrialization process
Notable achievements that have been realized in the last 4 years, include the following, among many others:
2.1 The industrial sector has continued to grow during the first term of the Fifth Phase Government - a total of 8,477 new industries of large, medium and small categories were established, creating 482,601 employments.
2.2 The Government has continued to implement the Roadmap for Improvement of Business and investment Climate and the Blueprint for Regulatory Reforms to Improve the Business Environment in order to eliminate business and investment constraints and attract more investments. The government has removed a total of 114 fees and charges imposed by the Ministries, Government Departments and Regulatory Authorities.
2.3 Construction, Transport and Energy Infrastructure, improvement of ports, the commencement of construction of the historic project - Standard Gauge Railway Line (SGR) and commencement of construction of a historic Julius Nyerere Hydropower (2,115 MW) Project at the Stigler’s Gorge. The improvement of transport and energy sectors as pointed out, will enable our country to have a robust and competitive economy.
2.4 Rehabilitation and improvement of the road network in the country.
2.5 Revamping of Air Tanzania Company Limited (ATCL) and re-establishment of marine facilities and transportation.
2.6 Growth of agriculture sector which enabled industries to access the raw material locally and foreign earning.
2.7 Improvement in the health and education sector.
2.8 Establishment of a culture of accountability and responsiveness within the public sector.
3.0 Measures in the 2020/21 Budget aimed at stimulating industrial growth
CTI wishes to thank the government for taking measures that are aimed at stimulating industrial growth. These include:
3.1 Continued rehabilitation of infrastructure, including those damaged by floods.
3.2 Offering support to alleviate the negative impact of COVID-19.
3.3 Continued financing and implementation of various strategic projects including:
- Construction of Central Railway Line to Standard Gauge;
- Construction of Julius Nyerere Hydropower Project (2,115 MW);
- Strengthening Air Tanzania Company Ltd;
- Facilitating the construction of Crude Oil Pipeline Project from Hoima (Uganda) to Tanga (Tanzania);
- Continuing with the construction and rehabilitation of Railways, Roads, Bridges, Airports, Ports, Ships in major Lakes and Ferries; and
- Strengthening of Electricity and Gas Production, Transmission and Distribution of infrastructure including expediting Rural Electrification;
- Continuing strengthening Special Economic Zones; and
- Mass training of professionals in the field with specialized skills.
3.4 Ensuring that for agriculture and industry, the focus will be on projects that utilize a significant amount of local input and raw materials including agricultural produce, mining resources and natural gas to promote local value chains.
3.5 Ensuring that the Government continues to implement the Action Plan on the Blue Print for Regulatory Reforms to Improve the Business Environment by continuing to reduce taxes and charges and eliminating the overlapping of responsibilities among Government Agencies dealing with regulatory, business and investment issues. The plan is to abolish or reduce 60 fees and charges.
The above measures will stimulate industrial growth and mitigate the challenge of the high cost of doing business for industries, thereby creating employment and generating wealth.
4.0 Favourable response to CTI Tax Proposals
The following are the tax reforms measures that were proposed by CTI and favourably considered in the 2020 /21 budget:
4.1 The Value Added Tax, CAP 148
Amending the Value Added Tax Act to enable exporters of raw products to recover input tax and enhance the competitiveness of the products in the international markets as well as abide by the VAT destination principles.
4.2 The Excise (Management and Tariff) Act, CAP 147
Maintaining specific excise duty rates for all non-petroleum products (soft drinks, cigarettes, beer, spirits, wine etc.).
4.3 The Vocational, Educational and Training Act, CAP 82
Reducing Skills Development Levy from 4.5 to 4.0 percent to relieve employers from the high cost of employment.
4.4 The East African Community Customs Management Act, 2004
- Stay application of the EAC CET rate of 25 percent and apply a duty rate of 35 percent for one year on importation of Ceramic tiles falling under HS Codes 6907.21.00; 6907.22.00 and 6907.23.00
- Stay application of the EAC CET rate of 25 percent and apply a duty rate of 35 percent for one year on Sacks and bags of jute or other textile base fibres of a tariff heading 53.03 falling under HS Code 6305.10.00
- Grant Duty Remission and apply a duty rate of 0 percent instead of 25 percent on raw materials used to manufacture Baby Diapers
- Grant Duty Remission and apply a duty rate of 0 percent instead of 10 percent on papers under HS Codes 4805.11.00 and 4805.19.00 and a duty rate of 10 percent instead of 25 percent on papers under HS Code 4805.24.00 and 4805.25.00
- Stay application of EAC CET rate of 10 percent and apply a duty rate of 10 percent or USD 125/MT whichever is higher for one year on flat-rolled products of iron or non-alloy steel and Flat-rolled products of other alloy steel of width of 600mm or more
- To impose an import duty of 25 percent or USD 250 per metric ton whichever is higher instead of 25 percent or USD 200 per metric ton for one year on Flat-rolled products under HS codes 7210.41.00; 7210.49.00; 7210.61.00; 7210.69.00; 7210.70.00 and 7210.90.00
- Stay application of EAC CET rate of 25 percent or USD 200/MT and apply a duty rate of 25 percent or USD 250/MT whichever is higher for one year on Flat-rolled products of iron or non-alloy steels falling under HS Code 7212.30.00; 7212.40.00 and 7212.50.00
- Stay application of EAC CET rate of 25 percent or USD 200/MT whichever is higher and apply a duty rate of 25 percent or USD 250/MT whichever is higher for one year on reinforcement bars and hollow profiles
- Stay of application of the EAC-CET rate of 10 percent and apply a duty rate of 25 percent for one year on papers under HS Code 4804.11.00; 4804.21.00; 4804.29.00; 4804.31.00 and 4804.41.00
- Grant Duty Remission and apply an import duty of 10 percent instead of 35 percent on Wheat Grain falling under HS Code 1001.99.10 and 1001.99.90 for one year
- Grant Duty Remission and apply a duty rate of 0 percent instead of 25 percent for one year on printed Aluminum Barrier Laminates under HS Code 3920.10.90
- Grant Duty Remission and apply a duty rate of 0 percent instead of 10 percent for one year on RBD Palm Stearin falling under HS Code 1511.90.40
- Stay of application of the import duty rate of 25 percent instead apply a duty rate of 60 for one year on mineral water falling under HS Code HS Code 2201.10.00
- To provide Duty Remission on a selected list of raw materials and industrial inputs for the manufacturers of textiles and footwear (Harmonized list)
- To increase the valuation of imported Kitenge from the current Valuation of USD 0.40 per meter to USD 1 per meter to discourage under-invoicing and under-declaration done by some of the unfaithful importers.
4.5 Implementation of the Blueprint for Regulatory Reforms to Improve the Business Environment by amending various fees and levies
- To reduce import Levy charged by Sugar Board of Tanzania (SBT) on industrial sugar from 2 percent of CIF value, or 2 percent of USD 460 (equivalent to USD 9 or more) per metric ton, whichever is higher to USD 7.5 per metric ton on imported sugar.
- Abolish Occupational Safety and Public Health Training fees of Tshs. 250,000/= per participant since the provision of public education on Safety and Health is the core obligation of OSHA.
- Reduce Accident Investigation fees from Tshs. 500,000/= on each expert who conducts investigations to Tshs. 120,000/= on each expert but the gross amount should not exceed Tshs. 1,000,000/=.
- To Amend the Local Government Finance (Fees for Billboards, Posters and Hoarding) Order 2019, by reducing Outdoor Advertising fee from Tshs. 10,000 to Tshs. 4,000 on Motor Vehicles promoting own products used for distribution to improve the business environment.
- Amend Fire and Rescue Act, CAP 427 to reduce fire and rescue inspection fees on gas deposit with less than or equal to 10 tons from Tshs. 2,000,000 to Tshs. 1,500,000/=;
- Amend Fire and Rescue Act, CAP 427 to reduce fire and rescue inspection fees on Gas cylinder shops with less than or equal to 100 square metre from Tshs. 100,000/= to Tshs. 40,000/=;
- Amend Fire and Rescue Act, CAP 427 to reduce fire and rescue inspection fees on mini- supermarket, retail and wholesale shops from Tshs. 40,000/= to Tshs. 20,000/=; and
- Amend Fire and Rescue Act, CAP 427 to reduce fire and rescue inspection fees on Mini Hydro with less than 10 Megawatt from Tshs. 6,000,000/= to Tshs. 200,000/=
The above tax measures will enable domestic industries to reduce the cost of production, improve consumer welfare, promote the use of local materials, enhance competitiveness and stimulate economic growth. Once again, CTI wishes to commend the Government for taking these positive steps.
5.0 Areas requiring further consideration
While appreciating the positive measures taken by the Government to stimulate industrial growth, CTI wish to request the Government to reconsider taking the following measures to alleviate the challenges facing industries in order to enhance industrial growth and in turn improve the economy in general:
5.1 While the Government has continued verifying and paying the outstanding claims of VAT and 15% additional import duty on industrial sugar, CTI wishes to submit that payments of outstanding dues to industries be expedited in order to provide the much-needed liquidity particularly at this time when industries need a boost to recover from the negative effects of COVID-19.
5.2 As we rejoice maintaining the excise duty on excisable goods, we would like to request that the price/fee charged on electronic stamps be reduced to cut down the cost of producing excisable goods (soft drinks, cigarettes, spirits, beer, wine, etc.) to reduce the burden on both manufacturers and consumers.
CTI is optimistic that the 2020/21 budget will support the positive initiatives taken by the Government to build an industrial economy and is committed to continuing working hand in hand with it to achieve the set economic goals.
P O Box 71783
Dar es Salaam
Tel: 2114954/ 213802/ 2130327