- Abolition of annual motor vehicle license and increase of excise duty on fuel.
- Abuse of charitable status by charitable organizations addressed.
- Withholding tax to small and medium scale miners.
- Emphasis on Government e-payment system (GePG).
- Abolition of VAT on transit goods to be consumed outside Tanzania.
The Finance Bill, 2017 (“The Bill”) dated 2nd June, 2017 has been introduced by the Minister for Finance and Planning on the 14th day of 2017 and has been published on the official website of the Parliament United Republic of Tanzania. The date of its operation is proposed to be 1st July, 2017.
The Bill provides for amendment of various laws with a view of imposing and introducing certain taxes, duties, levies and fees. It is expected that the proposed amendments shall lead to increased revenue collection the collection and seal loopholes of tax evasion. The Bill proposes amendments to the following legislation:
- The Excise (management and Tariff) Act, Cap. 147.
The Bill intends to amend specific rates for some excisable items. The notable change is the abolition of annual motor vehicle registration license which has led to an increase excise duty of TZS. 40/= per litre of fuel. The abolition is viewed as a relief to vehicle owners who had overdue payments resulting from compounding penalties arising from delayed payments of motor vehicle licenses. However, the increase of excise duty is expected to have an impact on increase of other services and goods.
- The Income Tax Act, Cap. 332.
The Bill proposes to amend various definitions under Section 3 of the Act. This has been done by deleting some of the words in the definition of the term “business”, “license” and “rehabilitation fund”. These amendments are aimed at subjecting non-profit making organizations to justify non-profit making ventures through normal tax process instead of being exempted from taxes.
Sections 19 is proposed to be amended by adding new sub-section section 19 (2)(d) with a view to eliminating ambiguities in law and mitigate revenue loss due to hedging or financial speculation arrangements which are occasioned by treating respective transactions as separate business and ring fencing of the resultant gain. Furthermore, Section 64 is amended with the view of ensuring that tax exemptions are only enjoyed by appropriate charitable organizations.
Section 69 is amended so as to curb tax avoidance in re-insurance services rendered outside Tanzania with a source payment from Tanzania. It is also proposed to introduce a new section 83B in order to impose withholding tax on payments derived by small and medium sale of miners. Small scale miners shall be required to withhold tax at the rate of 5% of the market value of the minerals.
- The Local Government Finance Act, (Cap. 290).
The Bill proposes to amend Section 31A so as to enable the Tanzania Revenue Authority (TRA) collect fees for billboards, posters and hoarding all over the county. This is criticized by some scholars as grab of the revenue sources from local government authorities after property tax which was introduced in the previous Finance Act, 2017.
Section 37 is proposed to be amended for the purpose of recognizing informal small vendors. The schedule to the Act is amended for the purpose of exempting informal small vendors from paying levies. The schedule is also amended to grant exemption to abator charges, service levy payable by guest house, posters that give direction to areas that offers social service, pharmacies and drug shop establishment fee and fees and levy payable by small renders situate outside special business places running with capital of one hundred thousand shillings.
- The Mining Act Cap. 123.
Section 18 proposes to restrict a mineral right holder or a licensed dealer to export mineral unless the person has paid the inspection fee. This part proposes to amend section 90 of the principal Act by imposing inspection fee on minerals to be exported by mineral right holder or a licensed dealer and it is proposed to be one per centum of gross value. This part also proposes to amend section 112 of the principal Act to enable the Minister responsible for mining to make regulations to enhance and operationalize inspection and impose inspection fee.
- The Public Finance Act, Cap 348.
Section 6A is added to the Public Finance Act, Cap 348. The same requires all public moneys to be collected through Government e-payment system. The amendment intends to curb loss of revenues collected by Ministries, Departments and Public Institutions.
- The Value Added Tax Act, Cap. 148.
The Bill propose to amend section 59 in order to relieve importers of goods from paying VAT on ancillary services. The amendments are in line with the destination principle where VAT is paid at a place where goods or services are consumed. The objective of the amendment is to reduce cost of transportation and make ports more competitive with a view to increasing Government revenue. This is a relief to the stakeholders in the transportation industry who have called upon the Government to abolish VAT on ancillary services for transit goods which has been imposed for only over a year ago. The VAT Act 2015 classified transit goods as zero rated supplies based on the destination principle but later, the same was changed through the 2016 amendments. The move was attacked by the general public and stakeholders and it was attributed as the main cause for declining business to the Dar es Salaam port towards the end of 2016 and the beginning of 2017.
The Bill further proposes amendment to Part I of the Schedule to the Act to provide tax exemption on animal feeds and fertilized eggs so as to promote animal husbandry. It is further proposed to amend Part II of the Schedule to the Act to grant tax exemption on capital goods namely; the importation of machinery for manufacturing vegetable oil, textiles, pharmaceutical products, hides and skin to promote industrialization and attract investment.
The corporate department at Breakthrough Attorneys has prepared a summary of legislative developments i.e. this Finance Bill for ease of reference to the general public and interested stakeholders.
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