Dar es salaam, Tanzania – For the year 2016/2017, Tanzania’s budget has zeroed in on “Industrial growth for Job Creation”.  
An emphasis of the first budget of the Fifth Phase Government with the motto “Hapa Kazi Tu” is to implement its commitment under the CCM Election Manifesto (2015-2020); Five Years Development Plan (2016/2017 – 2020/2021) and the National Development Vision 2025.
The main objectives are: Addressing challenges faced by Tanzanians and bringing new hope for a better life, especially to low income earners through major reforms in the Government’s undertaking through restoring discipline and accountability, strengthening integrity and management of public expenditure and national resources.
Developing industries to transform the economy into real middle income economy through developing industries that will foster job creation for youths and enhance agricultural productivity.
The industries would include textiles, livestock products, agro-processing including rubber products, cashew nuts, tobacco, sugarcane tea and paddy. The Government is determined to strengthen domestic revenue collections and therefore reduce donor dependency.
To achieve the objectives, the following measures have been proposed: Effective use of electronic systems and devices in collecting revenues; Widening tax base including formalization of the informal sector; Strengthening monitoring of revenues collected by Government Institutions and agencies; Continue measures to control and reduce tax exemptions; and Conduct frequent inspections and strengthen management at ports, airports and border posts to ensure appropriate tax collection. Positives: Efficient collections on tax revenues with 99% of the targeted revenues being collected between July 2015 and April 2016.
Under the Tax Administration Act, all businesses will be required to use EFDs with the exception of those exempted by the Commissioner General. Failure to do so would include forfeiting of business licences and banning them to carry on business within the country for a period of not less than 2 years.
Protection of local industries such as manufacturers of furniture, cement manufacturers, iron or non-alloy steel through increased import/excise duties. Reduced employment costs with Skills and Development Levy by 0.5% to 4.5% Members of Parliament would now be subjected to tax on the gratuity payments. No increase in fuel taxes. Challenges: Imposition of VAT on tourism services including tour guiding, game driving, water safaris, animal or bird watching, park fees, ground transport services, will cause the cost of such activities to hike.
This could have a negative impact on tourism. Tax exemptions to religious institutions and investors would require beneficiaries to pay taxes and apply for refunds, which would impact their cash flows. Reduced PAYE rate doesn’t cater for inflationary increase and heightened cost of living.
Tax payers in the lower tax bands end up feeling the burden of increased income tax whilst battling decline in purchasing power of the currency. Also, the need for increase of the income exempted in the first band has not been considered. Imposition of VAT on fees charged by the financial service sector would cause administrative burden for both the financial institutions in addition to excise duty will discourage the use of banking facilities by the informal sector. Increase in 10% duty on mobile money commissions will result in telecommunication companies passing on the burden of increased costs to final consumers in the form of increased charges for money transfers. This will discourage the use of mobile money services particularly by a majority of the population who use these services for sending money to rural areas and villages.
The basis of deriving the market value of rental income to be determined by the Commissioner General which could result in arbitrary adjustment to tax. Reduction of the individual tax rate for the lower income band from 11% to 9%.
Removal of individual tax exemptions on final gratuity to MPs to promote equity and fairness in taxation to all individuals. Tax on Investment income • Removal of tax exemption on sale of shares listed on DSE, owned by a resident or a nonresident person controlling less than 25%. Capital Gains Tax will therefore now apply at 10% for residents and 20% for non-residents.
Introduction of withholding tax on payments made to approved retirement funds arising from investment income. • Granting of powers to the Commissioner General of TRA to determine the rental income to charge withholding tax on the minimum market value. Skills and Development Levy (SDL) Reduction in Skills and Development Levy from 5% to 4.5% in order to provide employers with marginal relief from the tax burden.
The main changes to the VAT Act, 2014 are as follows: Exemptions granted on: • all unprocessed vegetables and unprocessed edible animal products including live fish, fruits, nuts, cereals, cereal flour, seeds, unprocessed foodstuff. • Raw soya beans in addition to livestock, basic unprocessed agriculture products and food for human consumption.
Vitamins and food supplements (micronutrient compound) which have been approved by the Minister for Health, Community Development, Gender, Elderly and Children. • Aviation Insurance. • Bitumen products. • Water treatment chemicals. Imposition on: • Tourism services including supplies of tourist guiding, game driving, water safaris, animal and bird watching, park fees and ground transport services.
Goods manufactured in mainland Tanzania and sold to Zanzibar will attract VAT in Zanzibar; whilst goods manufactured in Zanzibar and sold to mainland Tanzania will attract VAT in mainland Tanzania. This is in line with the destination principle. (VAT will be imposed at the place of consumption). • Fees based financial services provided by financial institutions, except interest paid on loans.
Excise Duty Non petroleum products An increase of 5% has been levied on non petroleum products to adjust for inflation. However the adjustments will not include bottled water. Item New rate (TZS) Old rate (TZS) Carbonated soft drinks 58 per litre 55 per litre Locally produced fruit juices 11 per litre 10 per litre Imported fruit juices 210 per litre 200 per litre Beer made from local un-malted cereals 430 per litre 409 per litre Other beers 729 per litre 694 per litre Other non-alcoholic beverages (including energy drinks) 534 per litre 508 per litre Wine with more than 75% domestic grapes 202 per litre 192 per litre Wine with more than 25% imported grapes 2,237 per litre 2,130 per litre Spirits 3,315 per litre 3,157 per litre Cigarettes Item New rate (TZS) Old rate (TZS) Without filter tip and containing domestic tobacco more than 75% 11,854 per thousand cigarettes 11,289 per thousand cigarettes With filter tip and containing domestic tobacco more than 75% 28,024 per thousand cigarettes 26,689 per thousand cigarettes Other cigarettes 50,700 per thousand cigarettes 48,285 per thousand cigarettes Cut rag or cut filter 25,608 per kg 24,388 per kg Excise duty on cigars remains at 30%.
Oils, grease and gas Item New rate (TZS) Old rate (TZS) Lubricating oils 699 per litre 665.50 per litre Lubricating greases 79 cents per kilo 75 cents per kilo Natural gas 45 cents per cubic feet 43 cents per cubic feet A number of changes in rates have been proposed under HS Codes 72 and 44 to 49 which relate to metal and wood products.
Others Item New rate Old rate Imported furniture (HS code 94.01 and 94.03) 20% 15% Charges / fees payable by a person to a telecommunication service provider in respect of money transfers to cover all commissions in provision of mobile money services 10 % .
The government has decided to abolish the manufacturing, selling, buying and use of plastic bags of less than 50 microns.
East African Community Customs Management Act, 2004 The following changes in the Common External Tariff (CET) were agreed by the EAC partner states: Description New rate Old rate Import duty on cement 35% 25% CET rate on flat rolled products of iron or non alloy steel 10 % 0 % Import duty on bars, rods of iron and steel 25% 10% Import duty on made up fishing nets 25% 10% Import duty on oil and petrol filters; intake air filters 25% 10% CET rate on aluminium milk cans 25% 10% Specific duty rate on worn shoes and clothes $ 0.4 per kg $ 0.2 per kg Paper products 25% (for1 year) 10%
Iron and steel products which are used in construction of bridges and bridge sections will attract a duty rate of 0% for one year instead of CET rate of 25%. Automotive bolts and nuts will attract a duty rate of 10% for one year instead of CET rate of 25%.
Manufacturers of bolts and nuts will be granted remissions by charging a duty rate of 0% instead of 10%. Local manufacturers of motor vehicle air filters will be granted duty remission of 0%. Splints used in the manufacture of matches will be granted import duty remission of 0%. Manufacturers of aluminium cans will be granted duty remission of 0%. Wheat (wheat grain) will attract a duty rate of 10% for one year instead of CET rate of 35%.
Import duty and CET rates of 25% or charge of specific duty rate of USD 200 per metric tons (whichever is higher) on flat rolled products of iron or non-alloy steel, bars, rods sections, angles, shapes and related products, steel enforcement bars, continue to apply for another year.
Manufacturers of crude edible oil will attract duty of 10% instead of 0% for one year. Import duty remissions levels will reduce progressively for sugar and sugar confectionary from the current rate of 10%. The rates will be as follows: 2016-2017 15% 2017-2018 20% 2018-2019 25% Exemptions under EACCMA to include the following: • Refrigeration equipment for human dead bodies for use in Hospitals, city councils or funeral homes; • Incinerator equipment and material used in hospitals to burn waste; and • Blood collection tubes and hygiene bags. Duty remissions on: • Inputs for the manufacturer of deep cycle batteries; and • Inputs / raw material for use in the manufacture of solar equipment. • Import duty exemptions on uniforms for hospital staff have been removed.
There are various minor changes to fees and levies charged by the following bodies: • Tanzania Food and Drugs Authority; • Cotton Board; • Tea Board; • Coffee Board; and • Cashewnut Board. The above are a few of the proposed changes as the Government is proposing to amend various other fees and levies which will be reflected in the Finance Act, 2016.
Abolish tax exemptions provided to armed forces. The mandate to collect property tax has been transferred from Local Government Authorities to the Tanzania Revenue Authority. In addition, TRA will estimate taxes based on the valuation of the properties. Increase in the following fees: • Motor vehicle registration fees from TZS 150,000 to 250,000.
• Motor cycles and tricycles registration fees from TZS 45,000 to 95,000. • Personalised registration number fee from TZS 5 million to 10 million every three years.
Source: Business Week

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