New Budget for Tanzania Economy Revealed

The latest 2009/2010 budget for the Tanzania economy was revealed yesterday by the minister of Finance and Economic Affairs, Mustafa Mkulo, who indicated that some of the changes in the budget that could be expected would be the elimination of several tax exemptions and the reduction of value added tax (VAT) from 20 percent to 18 percent.

“There are so many exemptions that are now negating our goal of widening the tax base,” said Mr. Mkulo in a Daily News report, “Almost 30 per cent of domestic revenue is lost through tax exemptions.”

According to the minister, tax exemptions for the 2007/2008 fiscal year were worth 3.5 percent of the gross domestic product, a significantly greater portion than that of Kenya and Uganda, reported as being 1 percent and 0.4 percent respectively.

In his address to the House, Mr. Mkulo went on to request the approval of TZS 9.5 trillion for the 2009/2010 financial year.

The minister went on to explain that, based on the new budget, mining firms would no longer be exempted from tax on petroleum products, beginning with contracts that are signed with the government after July 1, 2009.

“We are going to talk with mining firms currently operating in the country to review a
provision exempting them from tax on petroleum products,” Mr. Mkulo said to the House.

East African finance ministers met in Nairobi last month to review some of the provisions of the East African Customs Act and to discuss possible changes.

According to Mr. Mkulo, some of the measures that will be taken as a result of this meeting include the elimination of customs duty on insulated milk cooling tanks and zero rating duty on imported human medicines; the elimination of the 10 percent customs duty on crude palm oil; the elimination of a customs duty on industrial parts and motor vehicles used for the transportation of tourists; the exemption from customs duty on tampons and sanitary towels, raw materials used in production of paper and synthetic yarn such as polyester; a reduction on customs duty for second hand clothes from 45 percent to 35 percent.

In addition, Mr. Mkulo announced that the income tax was being reduced from 30 percent of the overall profit to 25 percent, in an effort to encourage firms to list their equities on the Dar es Salaam market.

In the end, Mr. Mkulo reiterated the idea that the primary focus of the latest budget and the reason for the changes was to help counteract the effects of the economic crisis.