Tanzania one of E. Africa's fastest growing economies

Tanzania's economy grew by 6.9 per cent last year, the highest among five East African Community member countries.

It was an improvement on the 6.4 per cent growth recorded in 2011.
The region’s biggest economy, Kenya grew at 4.7 per cent up from 2011’s 4.4 per cent.

The figures were revealed yesterday by the Minister of State in the President Office Responsible for Social Relations and Coordination, Stephen Wasira, when tabling in Parliament the state of the economy for 2012 and annual development plan for 2013/14 financial year.

Minister Wasira told the House that while Tanzanian and Kenyan economies were on the rise, those of the rest of the East African Community states were on the decline.

“Rwanda, Burundi and Uganda economic growth rates declined from 8.6 per cent, 4.2 and 6.7 in 2011 to 7.7 per cent, 4.0 and 2.6 in 2012 respectively,” noted Wasira.

Wasira added: “According to analysis, conducted by the Institute of Business Insider of USA, based on World Bank estimates, Tanzania is among the twenty countries with the highest projected compounded annual growth rates from 2013 to 2015”.

He said the EU-economic Commission for Africa report of 2013 shows that Tanzania is among ten fastest growing economies in Africa, recording at least 7 per cent growth in league with Ethiopia, Democratic Republic of Congo, Mozambique, Ghana and Zambia.
Despite the high performance, the Minister conceded that inflation rose to 16 percent from 12. 7 recorded in 2011.

“This rate of price increase was caused by rising oil prices in the world market and food prices, in part due to growing demand for food in neighbouring countries.

The index of food prices accounted for most of the overall sharp rise of inflation, as food constitutes half of the goods and services in the consumer goods basket used to compute inflation,” the minister said.

Wasira said measures to tame inflation included ensuring sufficient food supply, expanding cultivation of food crops and increasing availability of agricultural inputs, particularly fertilizer, pesticides and improved seeds and enhancing food security by increasing grains purchase through National Food Reserve Agency and construction of more silos.

According to the minister the value of goods and services exported rose by 15.5 per cent from $7,398.2 million in 2011 to $8,544.4 million in 2012, mainly to an increase in traditional exports particularly coffee, cotton and tobacco and increase in the export of manufactured goods, flowers fish and fish products.

The value of the imports and services increased increased by 5.1 per cent from $9,827.5 million in 2011 to $10,324.9 million in 2012, due to importation of capital, intermediate and consumer goods.

Foreign Direct Investment for 2012 was $1,806 million compared to $1,330 million, in 2011, an increase attributed to drilling of more wells for gas, which rose from three in 2011 to ten 2012.

SOURCE: THE GUARDIAN

Consultant: Oil, gas tax reforms still awaited

ax experts say the budget estimates presented by the Minister for Finance Dr William Mgimwa yesterday in Dodoma must incorporate significant tax reform proposals affecting key areas of the economy.

Alais Mwasha a registered tax consultant based in Dar es Salaam said for most of people, the expectation is that the minister’s tax reforms proposals will include those affecting the oil and gas sector.

He said considering that Tanzania is still exploring for oil and gas, the minister’s proposals are not expected to be limited to measures affecting the operators only but will extend to key players such as oil and gas service companies.

Some of the awaited reforms include but are not limited to extension of Value Added Tax (VAT) relief on goods and services solely to be used in exploration and production of oil and gas to contractors and Sub contractors.

Currently, the relief is limited to operators who possess licenses on specific blocks as per the terms of the Production Sharing Agreement (PSA) signed with Tanzania Petroleum Development Corporation (TPDC) on behalf of the Government of Tanzania.

He said the extension of the relief to service companies provided by the third Schedule to the VAT Act CAP 148 will not only allow flexibility of movement of specialized equipment between licensed operators but will also allow small endogenous players to access the specialized high end technology provided by multinational oil and gas service companies with less cost.

“It is not expected that such reforms will have any revenue impact on the government since the importation by or supply to oil and gas exploration companies, for oil and gas exploration project in Tanzania, are currently relieved from VAT and whatever VAT is paid by the service contractors and sub contractors qualify for refund”, he said.

Service companies are also keen to see more simplified tax regimes to be proposed in 2013/4 tax reforms for ease of operations across the East Africa region.
Introduction of such regimes for service companies will allow smooth operation within the region.

The law imposes assumed profit tax of gross payment to service companies like contractors/subcontracts in which such entities will only pay tax of 30percent or 37.5 percent for subsidiary and branch on 15 percent of gross income received, apart from disbursements such as mobilization and demobilization expenses.

Dr Mgimwa was also expected to propose extension of Duty exemption provided by the legal Notice No. EAC/9/2009 of 2 July 2009 to also cover service companies as most of machinery or inputs used during the exploration phrase are mainly owned by such companies.

The Minister has already listed some of his key budget focus for 2013/4 and long term development plans for the next five years.

One of such focus includes enhancing the concentration in the oil and gas sector. With this motive, it is then inevitable to consider proposal of tax reforms such as the above for smoothening the operation of service companies who are key players during exploration phase.

SOURCE: THE GUARDIAN

Budget: Exemptions for review

Aim is to raise more revenue
  Economy set to grow by 7.0 pct
  PAYE slashed to 13 pct, to give relief to workers

Minister for Finance, William Mgimwa

The government has pledged to review tax exemptions which have been costing the nation trillions of shillings, retarding social and economic development.

Tabling the 2013/2014 budget estimates in Dodoma yesterday, the Minister for Finance William Mgimwa said the move was among strategies aimed at raising more revenue.

He said the exemptions would be reviewed with a view to reducing them in order to save the money for other economic activities, he said, adding that Value Added Tax exemption on tourism was being scrapped.

According to one report Tanzania loses revenues between 1.35trn/- ($847 m) and 2.05trn/- ($1.29 bn) per year.

Dr Mgimwa said the government would continue with its efforts to establish one stop centre at the Dar es Salaam port and one stop border posts at Holili, Mutukula, Sirari, Horohoro, Kabanga, Tunduma, Rusumo and Namanga.

He said the government would also build capacity of the workers of Tanzania Revenue Authority (TRA) to deal with tax evasion by some dishonest companies.

“The government through TRA will establish a new system known as revenue gateway which would become operational on 1st July this year”, he said.

He said the system which included paying tax online, would help to improve collection.

Dr Mgimwa said the government expects to raise a total of 18.249trn/- for expenditure in the next financial year.

The central government revenue is expected to be 11.154trn/-from both tax and non-tax revenue sources.

Local authorities will contribute 383.452bn/- while grants and external loans will bring in 2.693trn/- . Domestic and non-concessional loans will make available a total of 2.982 trn/- .

He said the government plans to spend 5.674 trn/-, equivalent to 35 per cent for development activities and 12.6 trn/-,or 65 per cent of the total budget for recurrent expenditure, which includes 4.763trn/- salaries for government employees, 3.319trn/- for the Consolidated Fund and 4.492trn/- for other charges.

Minister Mgimwa the next government budget would give priority to six areas namely water, energy, transport, agriculture, education and income generation.
During the year 2013/14 the government has set aside 747bn/- to solve water problems in urban and rural areas.

In improving transport infrastructure, he said the government has set aside 2.1trn/- up from 1.9trn/- allocated last year. Out of the money, 196.8bn/- will be spent in improving rail infrastructure.

On energy and mines, he said more efforts will be directed to increase production and distribution of power whereas a total of 1.1trn/- has been set aside for the work.

Dr Mgimwa thanked development partners who have been supporting Tanzania in economic development.

He mentioned them as Canada, China, Denmark, Finland, Hispania, India, Ireland, Italy, Japan, South Korea, United States, Norway, Sweden, Belgium, France, Holland, England, Germany and Swiss.

Others are African Development Bank (AfDB) World Bank, BADEA, Global Funds, OPEC Fund, Saudi Fund, European Union, International Monetary Fund (IMF) and UN agencies.

Mgimwa said this year’s budget has been directed at pushing economic growth which will be 7.0 percent this year and 7.2 percent in 2014.

He said the budget aims to bring down inflation to 6 percent by June next year.
He said the government would make sure that there is enough foreign exchange equivalent to four months imports at any one time.

We will reduce the interest charged on loans and deposits and enhance the value of the shilling.

He further said in the 2013/2014 budget, the government intends to reduce unnecessary spending in various areas, citing seminars, local and foreign travel, purchase of furniture, exhibitions and purchase of motor vehicles.

“We will reduce the number of seminars and workshops while purchase of motor vehicles would be controlled by the office of the Prime Minister”, he noted.
Dr Mgimwa called for increased cooperation, monitoring, management and use of financial resources more efficiently.

“It is my hope that all of us will work hard to improve our economy so as to achieve the Nation’s Development Plans of the year 2015 which aims to move Tanzania from a basket of poor countries. 

SOURCE: THE GUARDIAN