Dar es Salaam: The 2012/13 Budget is full of cracks and lacks clear national focus, according to experts. Apart from lacking clear and realistic targets, the Budget has imposed new taxes and exemptions that analysts say are akin to putting money in a pocket with one hand and taking it away with the other. Speaking at the budget review forum organised by the international consulting firm Ernst & Young in Dar es Salaam yesterday, some experts said the Budget was a futile attempt to please everybody.
Twiga Cement CEO Pascal Lessoine said the financial plan had no clear dimension that could be understood.“It shows some ice and sugar. It is like mixing sugar and salt because it has positive and negative aspects,” he said.
A senior economics lecturer at Mzumbe University, Dr Honest Ngowi, said conditions were not conducive for the attainment of targets set in the Budget. He said the setting aside of 70 per cent of the Budget for recurrent expenditure and allocating just 30 per cent to development was ill-advised, adding that development expenditure was supposed to range between 40 and 50 per cent.
Dr Ngowi listed other flaws as raising tax on airtime from 10 to 12 per cent, saying this would adversely affect the development of ICT, and not taxing businesses earning up to Sh3 million a year while taxing workers earning over Sh170,000 a month.
“There is lack of tax justice and fairness when businesspeople earning up to Sh3 million are not taxed. Sh170,000 multiplied 12 times is less than Sh3 million, so the businessman earns more than the worker getting Sh170,000 a month, yet the latter is taxed while the former is not. It should also be taken into account that businesspeople can lie about their incomes as opposed to workers,” he said.
Dr Ngowi added that the quest to bring inflation down to single digits could never be succeed under conditions set by the 2012/13 Budget because the application of monetary tools to curb inflation could not work.
“Our inflation is structurally-based. This kind of inflation cannot be cured by the application of monetary policies. Our problem is that we wait for shortcomings to become apparent and them embark on addressing them without having a clear strategy. It’s like waiting for a disease to strike without first preparing the curative measures,” Dr Ngowi said.
For his part, a senior lecturer at the Business School of the University of Dar es Salaam, Dr Elinami Minja, said it was a “hand-to-mouth” Budget in that it does not comprehensively chart a clear development path. He added that there were too many priorities to the extent that there were no clear strategies on how some of the plans could be successfully implemented. “The Budget is too broad. It’s not well focused. It was supposed to focus on a few key sectors…three or four sectors,” Dr Minja said.
Private business consultant Evans Rwegasira aired similar views, arguing that there was no clear strategy aimed at maintaining financial discipline and preventing unnecessary spending. He expressed doubt on whether Tanzania could attain its goal of becoming a middle-income country by 2025, saying there was a tendency to set the same targets without having sound means to attain them.
In another forum organised by KPMG, economic and tax experts poked holes in the Budget, saying it had failed to meet people’s expectations on development. They said the government intends to reduce poverty, but the Budget did not outline a specific strategy towards this end.
Prof Humphrey Moshi of the University of Dar es Salaam said it was not possible to realise growth and poverty reduction without putting more emphasis on agriculture. He said that while the minister had outlined a general plan on agriculture, failure to focus on irrigation farming was a serious oversight that would hamper Tanzania’s quest for an agricultural revolution. Prof Moshi said the impact of economic growth on poverty was not significant because sectors like agriculture were not growing.
“We need to invest more in agriculture to realise tangible economic growth, but lack of political will to invest in irrigation farming despite rains being so unreliable will not take us anywhere,” he said. Prof Moshi said by importing cheap food, local communities would be discouraged from producing their own food, leading to a scramble for the imports.
KPMG managing director David Gachewa noted that reduced duty on sugar and wheat might not achieve the desired results due to a shortage of the commodities in the world market. He said there was no hope for workers as they were not adequately considered in the Budget, adding that they would continue paying more in terms of taxes to the government.
Mr Gachewa also said the minister did not clearly indicate how revenue would be increased substantially, adding that measures aimed at expanding the tax base were negated by high tax exemptions.He criticised the proposal to charge those who wanted their names to appear on vehicle number plates Sh5 million. “It is not very clear how many people may opt for this because no research was done to prove that it can earn the government more revenue,” Mr Gachewa said.
Speaking in separate interviews, experts and opposition politicians also voiced their concern about the many cracks in the Budget.
“The 2012/13 Budget is actually six per cent smaller than the 2011/12 Budget if inflation is taken into account, and this means that it is going to be a tough year,” said Ms Rose Aiko of Uwazi Twaweza. “The 2012/13 Budget amounts to Sh15.1 trillion, which in nominal terms is an increase of 11.8 per cent from the Sh13.5 trillion Budget of 2011/12. This is only true in face value, not real value.”
Prof Ibrahim Lipumba, chairman of the opposition CUF, said the biggest flaw in the Budget was the much smaller allocation to development compared to recurrent expenditure.
“I am surprised that development expenditure has gone down once again and is now only 30 per cent of the Budget. We are not doing enough on development and this is a sign of lacking strategic thinking,” he said.
NCCR-Mageuzi chairman James Mbatia said Tanzania’s currency continues to depreciate, while inflation remains high. “Internal revenue is only Sh8 trillion and this shows we still have a hill to climb as we strive to improve people’s lives,” he said.