NBAA AND TRA JOINT FORUM ON TAXATION AND BUDGET

BUDGET HIGHLIGHTS 2013/2014 GOVERNMENT BUDGET

Nicholaus M. F. Duhia

Paper presented at the Joint NBAA/TRA Forum and Budget Seminar held at

Ubungo Blue Pearl Hotel Dar es Salaam on Saturday 6 th July 2013.

NEW MAJOR FEATURES OF THE 2013/2014 BUDGET:

 Introduction and implementation of the NEW BUDGET CYCLE whereby Ministries present their budget estimates before the Budget Speech and execution of the Budget starts on 1 st July every year.

 Introduction of new procedure of identifying national priorities aimed at achieving the BIG RESULTS NOW initiative.

NEW MAJOR FEATURES OF THE 2013/2014 BUDGET:..

 In the fiscal year 2013/2014, the Government intends to implement 6 main areas identified as national priorities. These are:  Water;  Energy;  Transport;  Agriculture;  Education; and  Resource allocation

TANZANIA BUDGET OUTLOOK

REVENUE

Domestic Revenue: Tax Revenue Non Tax Revenue LGAs own Source General Budget Support MCA (T) Domestic Borrowing Non Concessional Borrowing

SHS' MILLION EXPENDITURE Recurrent Expenditure:

10,412,937 Consolidated Financial Services 741,134 Wages and Salaries

11,154,071

Other Charges: 383,452 Ministries 1,163,131 Regions 2,692,069 LGAs 1,699,860 1,256,400 Development Expenditure: Local Foreign

TOTAL REVENUE 18,348,983TOTAL EXPENDITURE SHS' MILLION

3,319,156 4,763,196

8,082,352

3,738,316 49,701 704,549

4,492,566

2,981,965 2,692,069

5,674,034 18,248,952

REVENUE MEASURES INTRODUCED BY THE FINANCE BILL, 2013:

 The changes in the various tax laws are based on the Finance Bill, 2013 presented before the Parliament by the Minister for Finance, Dr. William Augustao Mgimwa on 13 th June 2013 and the Schedule of Amendments presented subsequently at the second reading of the Bill.

 All the changes are effective from 1 st July 2013.

Income Tax:

 Ring fencing introduced for petroleum operations (in addition to ring fencing of mining introduced in 2010) for purposes of granting deduction on unrelieved losses – ss. 11 and 19.



Tax exemption on lease of aircrafts from non residents abolished – s. 82 and 1 st

Schedule.

 Time limit for making adjusted assessments on transfer pricing arrangements enlarged to 6 years – s. 96.

Income Tax:..

 Penalties prescribed for failure to issue a receipt (fiscal or manual) for shs. 5,000/= or more received for goods and services as follows [ss. 80A and 98(3)]:  1 st time offender – 5% of the value of manual receipt or un-receipted amount;  2 nd time offender – 10% of the value of manual receipt or un-receipted amount;  3 rd and subsequent time offender – summary conviction and fine ranging from shs. 25,000/= to shs. 500,000/= or prosecution and conviction with a fine ranging from shs. 1,000,000/= to shs. 3,000,000/= and/or 3 years jail sentence (s. 104).

 Commissioner empowered to prescribe procedures for imposition and collection of penalties.

Income Tax:..



Withholding tax introduced on:

 Services rendered by resident service providers (including professional services) - 5%;  Money transfer agency commission (M-PESA etc agents) – 10%.



Payments by resident Government funded corporations to resident

persons for supply of goods – with or without TIN registration – 2%. NB: The bill is silent on withholding tax by the Government.



[Ss. 83 and 83A and 1 st

Schedule].

Income Tax:..

 Monthly individual rates of income tax adjusted as follows:

Total Monthly Income Rate of tax

Where total income does not exceed Shs. 170,000 NIL 13% of the amount in excess of Shs. 170,000 Where total income exceeds Shs. 170,000 but does not exceed Shs. 360,000 Where total income exceeds Shs. 360,000 but does not exceed Shs. 540,000 Shs. 24,700 plus 20% of the amount in excess of Shs. 360,000 Where total income exceeds Shs. 540,000 but does not exceed Shs. 720,000 Where total income exceeds Shs. 720,000 Shs. 60,700 plus 25% of the amount in excess of Shs. 540,000 Shs. 105,700 plus 30% of the amount in excess of Shs. 720,000

Income Tax:..

 Introduction of 100% expensing of expenditure on equipment used for

prospecting and exploration of minerals and petroleum – 3 rd Schedule.

Value Added Tax:

 Zero rating of locally produced textile by local manufacturers using locally produced cotton abolished – Para 17 - 1

st Schedule; instead:

 Supplies of goods and services to local textile manufacturers using locally produced cotton to be 100% relieved from VAT – new Para

33 - 1 st

Schedule.

Excise Duty:



14.5% excise duty introduced on electronic communication services

(the original Bill sought to charge excise duty on telecommunication services – including mobile phone services) – s. 124.

NB: The definition of electronic communication includes cellular mobile phone services but it has not been amended in the amended Bill.

 Telecommunication sim cards to be charged excise duty of shs. 1,000/= per month – s. 124.

Excise Duty:..

 0.15% excise duty introduced on money transfers – in excess of shs. 30,000 – s. 124.

 Transfers between banks, financial institutions, government, diplomats and diplomatic missions exempt from the new duty – s. 124.  Excise duty on aged non-utility vehicles (over 10 years old) increased from 20 to 25 – s. 124.

 Excise duty on soft drinks, fruit juices, beer, wines and spirits, cigarettes and tobacco increased by 10% - 4

th

Schedule.

Excise Duty:..

 Excise duty on petrol increased from shs. 339 per litre to shs. 346 per litre (originally to shs. 400 per litre) - 4

th Schedule

 Excise duty on diesel increased from shs. 215 per litre to shs. 217 per litre - 4

th Schedule.

 Excise duty on illuminating kerosene increased from shs. 400 per litre to shs. 475 per litre - 4

th Schedule.

 No increase in the excise duty on bottled water - 4

th

Schedule.

Excise Duty:..

 Excise duty on gas oil abolished - 4

th

Schedule.

 Excise duty on cigar remains at 30% - 4

th

Schedule.

 Excise duty increased generally on various products.

Gaming Tax:

 Gaming tax on casino operations to be based on weekly instead of monthly gross gaming revenue and continue to be paid weekly.

Road and Fuel Toll:

 Fuel toll increased from shs. 200 per litre to shs. 263 per litre on petrol and diesel to support rehabilitation of infrastructural road networks –

2 nd Schedule.

Petroleum Levy:

 Petroleum levy of shs. 50 per litre introduced for financing rural electrification. (Not in the Finance Bill).

Road Licences:

 Annual road licences increased as follows (with old rates in brackets): (Not in the Finance Bill).

VEHICLE ENGINE CAPACITY

500cc or less

ROAD LICENCE FEES (SHS.)

NIL (50,000/=) Exceeding 1,500cc 500cc but less than Exceeding 1,500cc but less than 2,500cc 2,500 cc and above 150,000/= (100,000/=) 200,000/= (150,000/=) 250,000/= (200,000/=)

Contributions by Institutions, Government Agencies and Regulatory Authorities to the Government coffers:

 Government Agencies, Regulatory Authorities and Public Institutions to contribute 10% of annual gross revenue to Government coffers.

 These agencies, authorities and institutions are: • PPRA; • TPA; • TANAPA; • NCCA; • EWURA; • SUMATRA; • TCRA; • TFDA; • TCAA.

Skills and Development Levy:

 SDL rate reduced from 6% to 5%.

 Government departments or public institutions wholly financed by the Government exempt from SDL. Institutions not receiving Government subvention liable to pay SDL.

Tanzania Investment Act:

 Duty exemption on deemed capital goods reduced from 90% to 75%.

 Investors to pay 25% of import duty due on deemed capital goods.

 Following items removed from the list of deemed capital goods:  Office equipment, stationeries, furniture, sugar, beverages, spirits, tiles, non utility motor vehicles, crockeries, air conditioners, fridges, petroleum products, cutleries, beddings and electronic equipment.

Import Duty:..

Common External Tariff (CET) rates discussed and agreed with EAC Partner States as follows:

 Application of 35% CET on wheat grain delayed by one year.

 Duty on rice and sugar to be 25% instead of 75% and 100% respectively to cover the gap in the local market.

 Machinery and spare parts imported by TRL exempt from duty to improve railway operations.

 Compliant Trader (inspection) Scheme abolished.

Import Duty:..

 Import duty remission to soap manufacturers using LABSA raw materials for one year to encourage local small and medium scale soap industries.

 Plastic bag biogas digesters exempted fro duty to promote use of alternative sources of energy and protect environment.

 Duty on millstones and grindstones for milling, grinding and pulping increased from 0 to 25% to protect local industries in the Region.

Import Duty:..

 Water treatment effluent plant exempt from duty to promote use in industries and protect environment.

 Armed Forces to continue enjoying duty exemption for one more year.

 Goods imported by National Intelligence Services exempt from duty.

THANK FOR YOUR KIND ATTENTION AND AS THE HON. MINISTER FOR FINANCE HAS APPEALED IN HIS BUDGET SPEECH CLOSING SALUTATION: “LET ALL OF US PLAY OUR PART RESPONSIBLY IN IMPLEMENTING THE AGREED POLICIES AND PLANS”