Tanzania Finance Minister Announces VAT Reduction Accompany Budget

A recent announcement by the Tanzania Finance and Economic Affairs Minister, Mustapha Mkulo, has indicated that a decision to reduce the country’s Value Added Tax (VAT) from 20 percent to 18 percent was reached in accordance with the 2009/2010 budget.

This announcement was made during a parliamentary meeting in which the country’s latest budget was discussed and the decision and reached to reduce the overall VAT and, instead, impose VAT on leased buildings and apartments.

These decisions were reached, in part, in order that the financial policies of the Tanzanian government fall in line with its East African Community partners.

Some of the decisions that have been reached include the abolition of taxes on customs duty for industrial parts and vehicles that are used by tourist agents as well as the abolition of 10 percent of the customs duty that is charged on human medicines and crude palm oil.

In fact, the 10 percent customs duty on crude palm oil has been completely eliminated and will now follow in the steps of Kenya and Uganda, where the customs duty on crude palm oil is zero-rated.

According to Mr. Mkulo, in addition to these changes, the government has also reduced the exemptions on fuel for mining firms and the income tax on firms listed on Dar es Salaam Stock Exchange (DSE) to 25 percent and has eliminated the tax exemptions on deemed capital goods entirely.

Along with these reductions, the customs duty on second-hand clothes has also been reduced from 45 percent to 35 percent and the customs duty on raw materials for the production of paper has been replaced with a flat rate entry charge of USD 50.

Mr. Mkulo went on to request the budget approval of TZS 9.5 trillion from the House to cover the 2009/10 financial year.

Also included in this year’s budget is an increase on tariffs for soft drinks and beer from TZS 54 to TZS 58 per liter for soft drinks, from TZS 194 to TZS 200 per liter, for beer that has been brewed using local barley, and from TZS 329 to TZS 354 per liter for all other beers.

In addition, Mr. Mkulo said that based on the new budget, mining firms who signed a contract with the government after July 1 would no longer be exempted from tax on petroleum products.

Also, in an effort to reduce the cost and increase the availability of human drugs cheaper to the people of East Africa, Mkulo announced that the new budget would eliminate the customs duty on imported human medicine.