Finance and Planning Minister, Dr Philip Mpango, gave the directive before the National Assembly here yesterday when debating budget estimates for President’s Office (Regional Administration, Local Government and Good Governance).
The minister’s directives came following claims by some businessmen that the decrease in cargo traffic at the port was due to Vat Added Tax (VAT) and Single Customs Territory system. Dr Mpango, however, refused such claims as an afterthought.
However, the minister agreed that there was indeed a decrease in cargo volume at the port, citing the period between December, last year and March, this year.
Giving a two-year comparison for the same period, the minister said that cargo transport to the Democratic Republic of Congo (DRC) decreased from 5,529 to 4,092 containers for the period under review, which is equivalent to 26 per cent.
For cargo heading to Malawi decreased from 337 to 265 containers, while those on transit to Zambia, Dr Mpango noted a decrease of the cargo from 6,859 to 4,448. The minister, however, pointed out that customs collection for the same period has continued to increase. He also said that the decrease of the cargo has also gone down even on countries which do not use single custom territory system.
The minister also pointed out that transit cargo does not attract VAT tax, as the VAT Act only deals with small items.
The minister concluded, therefore, that there was no direct relationship with the single custom territory system. He cited the example of other countries, like China, whose economy in recent years has dropped, causing economic impact to other areas, Tanzania included.
It was reported recently that reduced cargo volume passing through Dar es Salaam port was not due to red tape or the fear of making decision by the port management, but due to value Added Tax on transit goods.
The Acting Port Manager, Hebel Mhanga, was quoted as saying that although it was yet to be enforced, the VAT on transit was scaring away importers as they fear it would increase port charges, hence inflating their costs of doing business.
“The problem of declining cargo volume is not due to red tape or the fear to make decision by the management. It is due to VAT on transit,” he said. A Kenyan newspaper had reported that Tanzania business community were ditching Dar es Salaam port for its rivals due to excessive bureaucracy and delays by the port management in making decisions for “fear of annoying the presidency.”
The paper quoted the Principal Communication Officer of the Kenya Ports Authority (KPA), Hajj Masemo, as saying the Mombasa Port management had noted increased transit volumes to Tanzania.
Mr Mhanga admitted there was a significant business volume decline at the Dar es Salaam Port but that was due to VAT on transit. He said though it was yet to be applied, it was scaring away importers.
He said the situation was serious as the problem of copper exports and transit vehicle volume from Zambia may decline due to the VAT threat. He said there was a likelihood that copper cargo from Zambia may decline as most agreements with importers were coming to an end in the near future. “The problem is that most of the big importers may not renew their contracts because of the VAT threat.
So, there is a possibility that copper cargo will decline,” he pointed out. So far, transit cargo for Zambia had declined by 50 per cent and it is likely there would be a further decline, he noted.
Earlier, the Chairman of the Tanzania Business Community, Mr Johnson Minja, was also quoted saying that it was true that many importers were opting for an alternative port as the tax regime at the Dar es Salaam Port were becoming unpredictable.
Source: Daily News

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