Dodoma: The government’s 2011/12 Budget tabled in Parliament yesterday contains a raft of proposals meant to stimulate economic activities and tame the spiralling cost of living. Big beneficiaries include players in the agricultural and industrial sectors, who will enjoy tax relief as part of measures to be taken to ease the burden on ordinary Tanzanians. Proposals contained in the Budget Speech by Finance and Economic Affairs minister Mustafa Mkulo include a 50 per cent reduction of excise duty on heavy furnace oil (HFO). Duty on the fuel has dropped to Sh40 per litre from Sh80.
Manufacturers of plastic bags of more than 30 microns also have a reason to smile after the government slashed tax from 120 per cent to 50 per cent tax.
In line with the East African Community Customs Management Act 2004, the government has brought some solace to soap manufacturers by granting duty remission on raw materials for the production of toilet and medical soaps. 'This measure is expected to reduce production costs and promote small and medium standalone soap industries in the country,' Mr Mkulo told an attentive House.
The move was apparently in response to complaints that high duty on palm stearin - a vital raw material in soap production - has led to a closure of an estimated 20 standalone soap factories in the past five years. In a decision meant to stimulate fish exports and increase foreign exchange earnings, the government has abolished withholding tax on fish exports.
Mr Mkulo, who listed electricity, water, infrastructure, agriculture and job creation as major priorities, also announced a VAT exemption on spare parts for threshers, rice dryers and mills, planters, trailers and power tillers to be used in organised farming. 'It is my hope that this measure will promote agricultural mechanisation and attract investment in the agriculture sector,' he said.
Mr Mkulo announced an exemption of VAT on pellet poultry feed and raw materials used in the manufacture of fishing nets. The minister said government also intends to reduce various levies on fuel. The move aims at cutting petrol and diesel pump prices, which have risen by almost 25 per cent in the last 12 months with a litre now retailing at an average of Sh2,000.
Mr Mkulo attributed the recent sharp rise in the cost of fuel to spiralling global prices fuelled by uncertainties in major oil producing countries in the Arab world, but admitted that a litany of levies charged locally were partly to blame for high pump prices. Most of these levies are pocketed by state agencies such as Energy and Water Utilities Regulatory Authority (Ewura), Surface and Marine Transport Regulatory Authority (Sumatra), Tanzania Bureau of Standards (TBS), Tanzania Ports Authority and Tanzanian and Italian Petroleum Refining Company Limited (Tiper) and oil importing companies.
'The government has decided to review the computation of these charges with the aim of reducing them. The review is expected to be completed in the financial year 2011/2012,' he said amid of round of approval by MPs. In the same vein, the government is finalising procedures for bulk importation of oil to be sold to marketing firms at wholesale prices. It is expect that the arrangement, expected to be implemented in 2011/12, will help to reduce retail prices.
However, Tanzanians will have to dig deeper into their pockets for some items and services after the government a domestic revenue collection target of Sh6.77 trillion to finance the Sh13.5 trillion Budget.
The government has increased Excise duty on non-petroleum products by ten per cent to bring the specific excise duty on carbonated soft drinks to Sh69 from Sh63 per litre. Beer made from local un-malted cereals will now attract a duty of Sh249 per litre from Sh226, while duty on other beers will go up from Sh382 to Sh420 per litre.
Consumers of wine and cigarette smokers will also have to dig deeper into their pockets as a ten per cent increase on excise duty on the products will push up prices. Apart from domestic revenue sources, Mr Mkulo hopes to get foreign loans and grants to the tune of Sh3.9 trillion while non-conventional loans are expected bring Sh1.27 trillion into the Budget.
In the current financial year (2010/11), the government planned to collect domestic revenue to the tune of Sh6.0 trillion to finance a total budget of Sh11.6 trillion. However, the government is likely to miss the target by about Sh500 billion.