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Tanzania Budget Speech 2017-18

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Tanzania Budget Speech 2017-18

Tanzania Budget Speech 2017-18
Photo credit: CMA CGM

Speech by the Minister for Finance and Planning, Hon. Dr. Philip I. Mpango, for the estimates of Government revenue and expenditure for 2017/18

This is the second budget submitted by the Fifth Phase Government under the leadership of His Excellency Dr. John Pombe Joseph Magufuli, the President of the United Republic of Tanzania. The Government presents this Budget with sincere intention of fast trucking realization of the aspirations of the National Development Vision 2025 through implementation of the CCM 2015-2020 Election Manifesto; Five Year Development Plan 2016/17-2020/21; and Long Term Perspective Plan (LTPP); and the Global Sustainable Development Goals (SDGs) 2030.

In his inaugural speech of the 11th Parliament on 20th November, 2015, His Excellency, Dr. John Pombe Joseph Magufuli, the President of the United Republic of Tanzania, laid down the economic priorities of his Government focused on sustaining and strengthening economic principles built by his predecessors. The priorities are as follows:

  1. To accelerate inclusive economic growth to reach middle income status;

  2. To increase revenue, curb leakages of government resources, control expenditure and enforce public procurement legislations;

  3. To improve economic infrastructure such as roads, railways, air and marine transport and energy to with the objective of attracting investors from within and outside the country;

  4. To ensure that minerals and our natural resources are utilized effectively for the benefit of our nation;

  5. To emphasize on industrial development bearing in mind that Private Sector plays a key role in building industrial economy. Furthermore, the targeted industries are those which will create jobs, utilize domestically produced raw materials, and produce goods which will be consumed by the majority of the people in the country;

  6. To improve agricultural produce, livestock, and fisheries focusing more on value addition and modernization through training, provision of inputs, and extension services;

  7. To emphasize on improving tourism, land use and environment management;

  8. To improve the quality of education, health services, water and energy;

  9. To combat rampant corruption, embezzlement and drug abuse; and

  10. To undertake major reforms in government operations with a view to minimize bureaucracy.

Therefore, the national economic performance review and evaluation of the government budget implementation for 2016/17 aim at providing a reflection on the priorities of the Government of His Excellency, Dr. John Pombe Joseph Magufuli.

In the speech I presented in the morning on the state of the economy for the year 2016 and the first four months of the year 2017, I made it clear that, our economy has continued to register high economic growth whereas Tanzania was among the top five African Countries. According to the recent economic statistics provided in the IMF World Economic Outlook Database, the five countries are: Ivory Coast (7.9 percent); Tanzania (7.1 percent); Senegal (6.6 percent); Djibouti (6.5 percent); and Ethiopia (6.5 percent). The Deputy Managing Director of the IMF, Mr. Tao Zhang also made his evaluation when he visited Tanzania in May, 2017, that Tanzania’s economy has remained stable due to implementation of policy reforms under the strong leadership of His Excellency Dr. John Pombe Joseph Magufuli, particularly in domestic resource mobilization and the fight against corruption.

Similar sentiments were provided by the World Bank through the report on Tanzania Economic Update released in April 2017. According to the Report, the national economy remains stable based on various indicators such as real GDP growth, inflation, trade balance, foreign reserves and the value of the shilling against USD; I beg to quote part of the report as follow:

Tanzania’s economic performance continues to rank among the highest in the region. The real GDP growth rate has consistently outpaced its EAC peers. The inflation rate remains relatively low. The current account deficit has significantly improved, with gross reserves sufficient to cover four months of imports. The shilling has also remained stable in 2016, following significant depreciation and volatility in 2015.”

Notwithstanding the aforementioned achievements, there have been some issues that dominated public debates regarding the stability of our economy, which I would like to elaborate. The issues include: liquidity squeeze, business shutdown and diminishing private sector confidence.

Business Shutdown

Another issue that has been widely debated by the public and the Members of this House is the concern of the increasing frequency of businesses closure, notably at Kariakoo in Dar es salaam and other cities. According to the information revealed by TRA during the period from July 2016 to March 2017, a total of 7,277 businesses were shutdown in different regions in the country. Generally, this trend is discouraging since residents lose jobs and incomes and the Government loses tax revenue, while the economy slows down. It is important therefore that whenever there is rampant closure of businesses, appropriate action should be taken to identify the type of businesses affected, the underlying factors with a view to take appropriate mitigating measures.

Factors put forward as contributing to business shutdown include, among others, stiff business competition, weak business management, increasing business operating costs attributed to transportation, taxes and levies; and non-compliance to business rules and principles. However, it is worth-noting that, following public awareness campaigns on tax compliance conducted by TRA, business owners have become aware of the need to report to TRA as soon as they cease their business operations in order to avoid accumulation of tax liabilities.

It is worth noting that, business start-up and closure is a common phenomenon in business operations. I would like to inform your esteem House that during the period from July 2016 to March 2017, TRA registered 224,738 businesses. Therefore, the image reflected should not be one sided. It is also important to note that this phenomenon does not happen in Tanzania alone. Historically, this has been happening in various countries in different forms and magnitudes. Many of us have learned about The Great Depression which occurred in Europe and America between 1929-1939. Likewise, many businesses in China encountered great shocks in 1980s whereas some of which could not survive while others managed to grow. This is well explained in the book by Tian Tao, et al, titled, Huawei: Leadership, Culture and Connectivity, 2017. I would like to quote a citation in page XXIV of the book:

From the 1980s onward, China was swept up in the largest wave of commercial development in human history. Businesses at the time were like ships, each raised up and carried along by the sheer momentum of the wave. Some, however, soon capsized and were swallowed up, while most drifted along, going with the flow. Others crashed against barriers in the sea or got stranded on deserted islands. Only a few rose atop the crest of the wave and survived, eventually sailed towards new lands.”

The Government through the Ministry of Industry Trade and Investment in collaboration with my ministry will continue to monitor closely business trends and will take appropriate measures when needed. The Government appeals to the business community in the country to conduct their businesses confidently by adhering to the country’s laws, regulations and procedures.

Loss of Private Sector Confidence

There have been assertions that business community have lost confidence due to statements given by leaders and steps taken by the government in streamlining business operations. I would like to reassure the business community that the Fifth Phase Government strongly believes that the private sector is an engine of the economy and highly values the contribution of the business community in economic development and the nation welfare in general. It is vivid that the great portion of goods and services for domestic use and exports which earn the country the foreign exchange are produced by the private sector. Similarly, private sector is the main employer and source of government revenue. Therefore, private sector is a great partner of the government in an effort of bringing national development.

In recognition of great importance of the private sector and business community, the government has continued to improve business and investment environment by strengthening macroeconomic stability, minimize bureaucracy, timely decision making, promote peace and security and ensure availability of improved infrastructure and services including access to reliable power and credit to private sector. Those are the areas that the Government focuses on and will continue to get priority. In addition, the Government is still determined to continue dialogue with business community through Tanzania National Business Council (TNBC), Tanzania Private Sector Foundation (TPSF) and other fora.

We have now started to witness improved business environment as reflected through various performance indicators. According to the World Bank Doing Business report of 2017, Tanzania has done better in doing business by moving 12 positions up from 144 in 2016 to 132 in 2017. Moreover, according to the report by Quantum Global Research Lab of UK on Africa Investment Index 2016, Tanzania was ranked as the most attractive investment destination in East Africa and the 8th in Africa up from 19th in 2015.

The Government will sustain dialogue with business community aimed at getting their proposals on policy reforms and consider their concerns for economic development. The Government aspiration is to ensure that businesses are conducted under predictable and conducive environment conducive to economic growth and job creation; revenue generation for financing development projects; and social services delivery. The Government, through TRA, will continue to modernize tax systems, improve procedures and create an enabling business environment to facilitate smooth operations. TRA, in collaboration with other government entities, will continue to conduct public awareness programs on the importance of formalization of their economic activities. I would like to emphasize that, paying taxes is an obligation, which every Tanzanian should adhere to, for national development. Hence, the Government will protect business community but will not tolerate looting of national resources and tax evasion.

Fiscal Policies for 2017/18

The East African Community Partner States agreed that, the 2017/18 budget theme should revolve around industrialization for job creation and shared prosperity. This is consistent with the industrialization agenda for Tanzania under the Fifth Phase Government of His Excellency, Dr. John Pombe Joseph Magufuli.

Macroeconomic Policy Targets

Implementation of 2017/18 budget is aimed at achieving the following macroeconomic targets:

  1. Attain real GDP growth of 7.1 percent in 2017 up from the actual growth of 7.0 percent in 2016;

  2. Continue to contain inflation at single digit in the range of 5.0 – 8.0 percent in 2017;

  3. Domestic revenue including LGA’s own sources is projected at 16.5 percent in 2017/18 up from the likely outturn of 15.8 percent in 2016/17;

  4. Tax revenue is estimated at 14.2 percent of GDP in 2017/18 up from the estimate of 13.3 percent in 2016/7;

  5. Total expenditures are projected at 26.2 of GDP percent in 2017/18 from the estimate of 23.7 percent in 2016/17;

  6. Narrow the budget deficit to 3.8 percent of GDP in 2017/18 from 4.5 percent in 2016/17;

  7. The ratio of current account deficit to GDP is projected at 7.0 percent: and

  8. Maintain gross official reserves sufficient to cover at least 4.0 months of projected import of goods and services (excluding FDI).

Revenue Policies

The Government is committed to increase and strengthen domestic revenue collections by pursuing the following policies:

  1. Continue emphasizing effective use of electronic devices and systems in revenue collection to contain revenue leakages;

  2. Continue to widen the tax base including formalization of the informal sector to capture it into the tax net;

  3. Improve collection and strengthen management of non-tax revenue;

  4. Continue with mass valuation of properties to increase property tax revenue;

  5. Formalizing land ownership with a view of increasing revenue; and

  6. Continue with control measures to minimize abuse of tax exemptions.

In 2017/18, the Government will continue to expand domestic financial market in order to increase number of participants in the market from both internal and external that will enable the Government to raise resources to close the budget deficit at an affordable rate. The Government will expedite negotiation process for external non-concessional borrowing, while safeguarding the national interests and ensuring that proceeds raised are directed to development projects.

The Government, in collaboration with Development Partners, engaged a team of independent consultants in a bid to fostering development cooperation and ensuring that funds committed for various projects and programs are timely released. The Team, led by Dr. Donald P. Kaberuka, the former President of the African Development Bank, was commissioned to assess and recommend on improvement of development cooperation and financing instruments.

The consultants’ recommendations to strengthen development cooperation, amongst others, include:

  1. Establishing effective dialogue: The focus is to hold annual review and strengthen Public Expenditure Review (PER) process, optimizing impact of sector working groups as well as addressing sensitive issues without affecting budget process;

  2. Building institutional capacity: The drive is to create a world-class skills across a range of areas such as negotiation skills for exploitation of natural resources, financial sector management, trade policies, external debt management, and research and policy analysis; and

  3. Financing Development Agenda: The motive is to leverage resources from the Private Sector through Public Private Partnership (PPP) arrangement. Further, the General Budget Support (GBS) can still be used in strategic areas such as clearance of Government’s arrears, which are threatening the growth of our economy.

The Government is currently incorporating the consultants’ recommendations in the Development Cooperation Framework (DCF). The framework will address various issues, including: principles of development cooperation; the dialogue structure; and financing instruments which match the country’s requirements. The Government is optimistic that, these measures will improve cooperation between the parties and enable Development Partners to honour their commitments by disbursing funds timely.

Priority Areas for 2017/18

The 2017/18 Annual Development Plan is part of the implementation of the National Five Year Development Plan 2016/17 – 2020/21. As spelt out in my speech on the State of the Economy for 2016, priority areas reflected in the Plan include:

  1. Interventions for fostering economic growth and industrialization;

  2. Interventions for fostering human development;

  3. Interventions to create a conducive environment for enterprises and businesses to thrive; and

  4. Interventions to strengthen implementation effectiveness.

The Plan emphasizes successful implementation of Flagship Projects, which include: construction of new standard gauge railway line; revamping the national air carrier; mining of coal and iron ore and construction of iron and steel complex in Mchuchuma and Liganga – Njombe; establishment of Special Economic Zones; construction of a Liquefied Natural Gas (LNG) Plant; establishment of Kurasini Trade and Logistics Centre; development of Mkulazi Agricultural Farm and Sugar Factory; and mass training for development of specialized skills for industrialization and human development and fostering science, technology and innovations.

Policy and Administrative Measures

The Government will continue to undertake various policy and administrative measures in order to strengthen and simplify revenue collection. The measures among others include:

  1. To strengthen revenue collection systems by applying electronic systems so as to curb revenue leakages. The “Government Electronic Payment Gateway System” is already in place for use by Ministries, Government Departments and Institutions. I am directing all the Ministries, Government Departments and Institutions to start using the system.

  2. The Government has launched a new system of revenue collection (Electronic Revenue Collection System (e-RCS)) which will ensure proper assessment of taxes and provide assurance to the tax payers on the amount of taxes they are supposed to pay. The system will start operating in this financial year and it will be managed by Tanzania Revenue Authority, Tanzania Communication Regulatory Authority and Zanzibar Revenue Board.

  3. During the financial year 2017/18 the Government will continue to collect Property Tax (for valued and non-valued houses) in all local government authorities. The collection of Property Tax will be managed by the Ministry of Finance and Planning through Tanzania Revenue Authority. The Government will impose Property Tax on all houses and the property rate will be determined by the Minister for Finance and Planning. For houses which have not been valued, a flat rate of shillings 10,000 per normal house will apply and the rate of shillings 50,000 per each floor of a story house.

  4. To officially identify informal small businesses and those operating in informal places for example food vendors, small second hand clothes sellers, small agricultural products (vegetables, banana and fruits) sellers, etc by issuing them identity cards.

  5. To continue with enforcement measures and emphasis on the use of Electronic Fiscal Devices (EFDs) by Ministries, Government Departments and Institutions and to all businesses.

  6. The Government will open an Escrow Account starting July, 2017 to ease the refund of additional import duty of 15 percent of F.O.B value paid by importers of sugar for industrial use and ensure that the refund is paid on time.

  7. The Government will not allow direct exportation of minerals from the mines to other countries and instead it will establish clearing houses at the international airports, mining areas and other appropriate areas where the minerals will be verified and issued export permit before being exported. The Government will impose a clearing fee of one percent of the value of minerals.

Reform of the Tax Structure, Fees, Levies and Other Revenue Measures

Together with the policy and administrative measures, I propose to make amendments to the tax structure that will include amendments of tax rates, fees and levies imposed under various laws. These amendments are intended to increase Government revenue, to promote economic growth particularly in the industrial, agricultural and transport sectors and also increase employment opportunities. The proposed amendments are as follows:

  1. The Value Added Tax Act, CAP 148;

  2. The Income Tax Act, CAP. 332;

  3. The Excise (Management and Tariff) Act, CAP 147;

  4. The Road Traffic Act, CAP 168;

  5. The Local Government Finance Act, CAP 290;

  6. The East African Community Customs Management Act, 2004;

  7. Minor amendments in tax laws and other laws; and

  8. Amendment of various fees and levies imposed by Ministries, Regions and Independent Departments.

The Excise (Management and Tariff) Act, CAP 147

I propose to make amendments in the Excise (Management and Tariff) Act, CAP 147 as follows:

  1. To adjust for inflation rate of 5 percent the specific excise duty rates on non-petroleum products. The adjustment is done because when the excise duty is imposed by using specific rates, it doesn’t consider inflation and therefore erodes Government revenue. The best approach is to adjust the specific duty rates in order to keep pace with inflation rate. This is different from the case where the Excise Duty is imposed by using ad valorem rates because the values take account of inflation. According to the Excise Tax (Management and Tariff) Act, CAP 147 Section 124(2), the specific excise duty rates may be annually adjusted in accordance with the projected inflation rate and other key macroeconomic indicators. However, in order to support the National Strategy for building an industrial economy, the Excise Duty for some locally produced products will not be adjusted. The adjustment of specific excise duty rates are as follows:

    1. Excise Duty on soft drinks from shillings 58 to shillings 61 per litre which is an increase of shillings 3 per litre;

    2. Excise Duty on imported water including mineral waters containing added sugar or other matter of flavour from shillings 58 to shillings 61 per litre, which is an increase of shillings 3 per litre. The Excise Duty on locally produced water remains at shillings 58 per litre;

    3. Excise Duty on locally produced fruit juices from shillings 9.5 per litre to shillings 9.0 per litre;

    4. Excise Duty on imported fruit juices from shillings 210 to shillings 221 per litre which is an increase of shillings 11 per litre;

    5. Excise Duty on beers made from local unmalted cereals from shillings 429 to shillings 450 per litre which is an increase of shillings 21 per litre;

    6. Excise Duty on other beers from shillings 729 to shillings 765 per litre which is an increase of shillings 36 per litre;

    7. Excise Duty on non-alcoholic beers (including energy drinks and non-alcoholic beverages), from shillings 534 to shillings 561 per litre which is an increase of shillings 27 per litre;

    8. Excise Duty on wine produced with domestic grapes with content exceeding 75 percent from shillings 202 per litre to shillings 200 per litre;

    9. Excise Duty on wine produced with more than 25 percent imported grapes from shillings 2,236 to shillings 2,349 per litre which is an increase of shillings 113 per litre;

    10. Excise Duty on imported spirits from shillings 3,315 to shillings 3,481 per litre which is an increase of shillings 166 per litre. The Excise Duty on locally produced spirits remains at shillings 3,315 per litre;

    11. Excise Duty on cigarettes without filter tip and containing domestic tobacco more than 75 percent, from shillings 11,854 to shillings 12,447 per thousand cigarettes, which is an increase of shillings 593 per thousand cigarettes;

    12. Excise Duty on cigarettes with filter tip and containing domestic tobacco more than 75 percent, from shillings 28,024 to shillings 29,425 per thousand cigarettes, which is an increase of shillings 1,401 per thousand cigarettes;

    13. Excise Duty on other cigarettes not mentioned in (k) and (l) from shillings 50,700 to shillings 53,235 per thousand cigarettes, which is an increase of shillings 2,535 per thousand cigarettes;

    14. Excise Duty on cut rag or cut filler from shillings 25,608 to shillings 26,888 per kilogram which is an increase of shillings 1,280 per kilogram;

    15. Excise Duty on cigar remains at 30 percent.

  2. To abolish Annual Motor Vehicle Licence Fee and increase Excise Duty on Petrol (Motor Spirit and Premium), Diesel (Gas Oil) and Kerosene (IK) by shillings 40 per litre from shillings 339 to shillings 379 per litre of petrol, from shillings 215 to shillings 255 per litre of Diesel and from shillings 425 to shillings 465 per litre of Kerosene. The increase of Excise Duty on Petrol, Diesel and Kerosene is intended to compensate the loss of revenue resulting from the abolition of Annual Motor Vehicle Licence Fee which among others, it will address the complaint of imposing fee even if the vehicle is out of use.

The Excise Duty measures altogether are expected to increase Government revenue by shillings 27,801.8 million.

The East African Community Customs Management Act, 2004

The Ministers responsible for Finance from the EAC Partner States held their meeting “Pre- Budget Consultations” in Arusha, Tanzania on 6th May, 2017. During the meeting, they agreed to undertake the comprehensive review of Common External Tariff as a requirement under the Custom Union Protocol. Furthermore they agreed to effect changes in the Common External Tariff (CET) and make amendments to the East African Community- Custom Management Act (EAC-CMA), 2004 for the financial year 2017/2018. The focus was mainly on industrialisation for job creation and shared prosperity.

The changes in Common External Tariff (CET) which were recommended and agreed are as follows:

  1. Grant duty remission on wheat grain falling under HS Code 1001.99.10 and 1001.99.90 and apply duty rate of 10 percent instead of 35 percent for one year. The measure takes into account that the region has no adequate capacity to produce wheat and satisfy the demand;

  2. Grant Duty Remission on Linear Alkyl Benzen Sulphuric Acid (LABSA) falling under HS Codes 3402.11.00; 3402.12.00 and 3402.19.00 at duty rate of 0 percent instead of 10 percent for one year. The measure is intended to promote cottage industry particularly the stand alone soap manufacturing industries as this is an input for soap manufacturers;

  3. Continue to grant duty remission on CKD kits for motorcycles at a duty rate of 10 percent instead of 25 percent for one year. This measure is taken in order to continue promoting local motorcycle assembling in the EAC region while awaiting a team of experts in the region to develop a list of exclusion and inclusion on CKD motorcycle assembly under duty remission and develop the regulation so that the assembly includes locally manufactured inputs;

  4. To extend stay of application of the EAC CET rate on Crude Palm Oil falling under HS Code 1511.10.00 and apply 10 percent instead of 0 percent for one year. This measure is intended to continue supporting the production of oils seeds and growth of edible oil industries. In order to ensure successful implementation of industrial development strategy, we need to promote oil seeds and edible oil production in the country;

  5. Grant stay of application of EAC CET rate and instead apply a duty rate of 25 percent or USD 250 per metric ton whichever is higher on Flat-rolled products of iron or non-alloy steel falling under HS Codes 7210.41.00; 7210.49.00; 7210.61.00; 7210.69.00; 7210.70.00; 7210.90.00; 7212.30.00; 7212.40.00; 7212.50.00; 7212.60.00 for one year. The anti-dumping measure on imports of this nature is aimed at protecting the domestic industries against cheap products from outside the region;

  6. Continue stay of application of EAC CET rate and instead apply a duty rate of 25 percent or USD 200 per metric ton whichever is higher on Steel Rods and Bars and Hot-rolled Angles, Sections, falling under HS Codes 7213.10.00, 7213.20.00, 7214.10.00, 7214.20.00, 7214.30.00; 7214.91.00, 7214.99.00, 7216.10.00, 7216.21.00, 7216.22.00 and 7216.50.00 for one year. This is also aimed at protecting the domestic industries against cheap products from outside the region. Furthermore it promotes further investment and increase employment;

  7. Grant duty remission on inputs falling under HS Code 7228.20.00 and apply duty rate of 0 percent instead of 25 percent or USD 200 per metric ton whichever is higher for manufacturers of leaf spring. The measure takes into account that during the year 2016/17 there was manufacturers of leaf spring in Tanzania who were adversely affected by the introduction of import duty of 25 percent or USD 200 per metric ton whichever is higher on their raw materials. The duty remission measure is therefore intended to protect domestic production of iron and steel products against unfair competition from imported products while at the same time these are raw materials to manufacturers of leaf spring;

  8. Grant stay of application of EAC CET rate and instead apply a duty rate of 10 percent or USD 125 per metric ton whichever is higher on Flat-rolled products of iron or non-alloy steel, with a width of 600 mm or more, cold rolled or cold reduced falling under HS Code 7209.15.00, 7209.16.00, 7209.17.00, 7209.18.00, 7209.25.00, 7209.26.00, 7209.27.00, 7209.28.00, 7209.90.00, for one year. This measure is aimed at protecting domestic industries from influx of cheap imports from outside the EAC region;

  9. Continue to provide duty remission at duty rate of 0 percent on inputs for manufacturers of “air filters” in the region. The measure is aimed at supporting the local manufacturers of the products in the region and create employment;

  10. Grant stay of application of EAC CET rate on Gypsum Powder falling under HS Code 2520.20.00 and apply a duty rate of 10 percent instead of 0 percent for one year. This measure is intended to protect the local producers and promote production of gypsum powder by using locally available raw materials;

  11. Grant stay of application on the reduction of remission level on sugar for industrial use under HS Code 1701.99.10 and apply duty rate of 10 percent. During the financial year 2016/17, it was agreed to reduce progressively the import duty remission levels from 90 percent to 75 percent so that the import duty rate moves from 10 percent to 25 percent for the period of three years. However, the EAC Partner States did not implement this measure. This has taken into account that sugar is a key raw material in the foods, beverages and pharmaceutical sectors which are critical sectors for human needs;

  12. Grant stay of application of EAC CET rates on Electronic Fiscal Devices (EFDs) Machines falling under HS Code 8470.50.90 and apply duty rate of 0 percent instead of 10 percent for one year. This is to encourage the use of electronic devices for accounting of VAT for efficient management control in areas of sales analysis and stock control system;

  13. To extend the stay of application of the EAC CET rate and apply a duty rate of 25 percent instead of 10 percent on paper products falling under HS Codes 4804.11.00; 804.19.90; 4804.21.00; 4804.29.00; 4804.31.00; 4804.39.00; 4804.41.00; 4804.51.00; 4804.59.00; 4805.11.00; 4805.12.00; 4805.19.00; 4805.24.00; 4805.25.00; 4805.30.00; 4805.91.00; and 4805.92.00 for one year. This measure is intended to protect the local producers of these products and promote production of papers in the region;

  14. Grant duty remission of on inputs for use in the assembly of equipments specifically designed for use by disabled persons at 0 percent. This measure is intended to promote manufacturing of these essential equipments within the region and therefore increase employment;

  15. Grant stay of application of EAC CET rate on aluminium structures of HS Codes 7610.90.00 and instead apply duty rate of 25 percent instead of 0 percent for one year. This measure is intended to harmonise duty rates of similar articles of base metal i.e. Steel and aluminium;

  16. To change a wording of tariff code 4911.99.20 to include examination answer sheets so that the import duty of 0 percent applies for both examinations question papers and examination answer sheets; and

  17. Grant duty remission on inputs for use in the assembly and construction of ships at 0 percent. This measure is intended to provide relief to the assemblers and promote the fishing industry, marine transport and job creation.

The Ministers responsible for Finance also agreed to make amendments in the EAC-Customs Management Act, 2004 as follows:

  1. To amend Part B of the 5th Schedule of EAC CMA 2004 by deleting para 25 in order to remove import duty exemption on Compact Fluorescent Bulbs (CFL) and Light Emitting Bulbs (LED). These are finished products;

  2. To amend Section 203 of the EAC CMA by replacing the USD 10,000 fine with USD 20,000 or 50 percent of the dutiable value of the goods, whichever is higher. The intension is to put a deterrent measure on offences (such as false documents, false declarations, fraudulent evasion of payment of taxes, etc). Currently the maximum fine Customs can charge on such offences is only USD 10,000 which is not punitive enough to deter offenders;

  3. To amend Section 218 of EAC-CMA 2004 to give the powers of the restoration of seized items to Commissioner of Customs instead of EAC Council of Ministers;

  4. To amend Para 30 of the 5th Schedule to the EAC-CMA, 2004 to include distribution of Oil and Gas. This measure is intended to provide import duty exemption on projects of Heated Crude Oil Pipeline implemented by Partner States Governments;

  5. The Import Duty Measures altogether are expected to increase Government revenue by shillings 16,053.9 million.

Budget Structure for 2017/18

Consistent with 2017/18 macroeconomic targets and fiscal policy objectives, the Government plans to mobilize and spend shillings 31,712.0 billion. Domestic revenue, including LGAs own sources, is estimated at shillings 19,977.0 billion, which is 63 percent of the total resource envelope. Out of this amount: tax revenue is estimated to be shillings 17,106.3 billion or 85.6 percent of domestic revenue; non-tax revenue is shillings 2,183.4 billion; and revenue from LGAs own sources is shillings 687.3 billion.

Development Partners are expected to contribute shillings 3,971.1 billion, which is 12.5 percent of the total budget in the form of grants and concessional loans. The amount is comprised of shillings 2,473.8 billion for development projects, shillings 556.1 billion for sector basket funds and shillings 941.2 billion for General Budget Support.

The Government intends to borrow shillings 7,763.9 billion from domestic and external non-concessional sources. Domestic borrowing is estimated at shillings 6,168.9 billion, comprised of shillings 4,948.2 billion for rollover of maturing government securities and shillings 1,220.7 billion equivalent to one percent of GDP is new loans for financing development expenditure. In order to speed up development of infrastructure, the Government expects to borrow shillings 1,595.0 billion from external sources.

In the year 2017/18 the Government will increase efforts in resource mobilisation from domestic and external sources for implementation of development projects. However, implementation of huge projects, including the construction of the subsequent phases of the standard gauge railway and improvement of various ports in the country, will depend on resources availability after mid-year review. In addition, the process of issuing non-cash bond to social security funds will proceed immediately after the approval of the Government in order to settle verified arrears owed to Government.

In 2017/18, the Government plans to spend shillings 31,712.0 billion. Out of this, shillings 19,712.4 billion is for recurrent expenditure, including shillings 7,205.8 billion for wages and salaries, and shillings 9,461.4 billion for public debt and general services. Development expenditure is estimated at shillings 11,999.6 billion equivalent to 38 percent of the total budget, whereby shillings 8,969.7 billion is local funds and shillings 3,029.8 billion is foreign funds. The current level of 38 percent is within the range of 30 to 40 percent of the total budget as stipulated in the Five Year Development Plan 2016/17-2020/21. 

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Tanzania Budget Speech 2017-18 - Author(s): Hon. Dr. Philip Mpango

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