What Your Banker Must Give You Monthly

What your banker must give you monthly

Shabu Maurus, Tax Partner, Auditax International.Taxing services has never been simple. For example, applying value-added tax (VAT) on financial services has been a practical nightmare. And when services and transactions are provided electronically, the problem becomes even worse. Think of transfer of your money from your bank account to your mobile money wallet and vice versa. Or withdrawing cash from ATM.

From 2015, Tanzania made some VAT reforms to start collecting VAT on fees charged by financial services providers to their customers. However, the implementation of it has seen several glitches. With the advent of e-commerce and the emergence of new business models, some provisions of the tax laws are becoming redundant or practically unsuitable. The VAT system in Tanzania is dependent on tax invoices and fiscal receipts. These are mainly physical in nature. When you transfer money from your bank account to mobile money wallet using your phone (mobile banking) or online (internet banking), there is VAT on the fee that a bank charges you. But, practically how do you get an EFD receipt (a piece of paper) for that electronic transaction? Also, the number of financial transactions happening electronically makes the issuance of physical EFD receipts practically impossible. But the VAT law requires customers to support their VAT claims by using fiscalised tax invoices or EFD receipts.

Last year the Minister of Finance issued regulations that clarified some of these questions. The Value Added Tax (General) (Amendment) Regulations, 2018. Recently (on 23rd August 2019), TRA also issued a notice that emphasizes compliance with those regulations by financial institutions and their customers. The VAT regulations, among other things, require financial institutions to issue “periodic statements” to its customers.

What are “Periodic Statements”?

Ideally, the periodic statements are intended to serve the same functions as “tax invoices”. According to the VAT Regulations, “periodic statement” means a statement issued every month by a supplier of financial services. The VAT Regulations makes it mandatory for financial institutions to issue periodic statements to its customers who are registered for VAT within ten days after the month-end. For customers who are not registered for VAT, issuance of periodic statements is optional.

Mandatory contents

The VAT Regulations prescribe the contents of the periodic statements. The required contents make periodic statements fundamentally different from the traditional “bank statements”. In addition to the standard contents such as a date, the periodic statements need to have name, address, TIN and VAT number (VRN) of both the customer and the financial institution. The periodic statement also needs to show all transactions, the value of each transaction excluding VAT, the VAT rate applied, the amount of VAT charged and the total amount payable by the customer. So, the concept here is pretty much the same as a tax invoice.

Implications for financial institutions

To comply with the new regulations, financial institutions need to know the VAT status of all its customers. Both existing and new. The new requirements may also call for some system changes. Changes that will enable them to issue the periodic statements with the prescribed contents.

Implications to customers

According to the VAT Regulations, a customer of a financial institution who is registered for VAT will not be entitled to claim VAT charged by a financial institution unless such VAT is supported by a periodic statement at the time of filing the monthly VAT return. Under the new regulations, a periodic statement is deemed to be a tax invoice. So, if you are VAT registered, you should demand a periodic statement from your banker

By Shabu Maurus, Tax Partner, Auditax International.

Tax Compliance Behaviour

Why some people don’t pay taxes - (3)

Shabu Maurus, Tax Partner, Auditax International.Is non-compliance with tax laws necessarily deliberate? My previous two articles highlighted some of the major factors that influence tax compliance. Both economic and behavioural factors. But both the economic and behavioural models assume that non-compliance by taxpayers is a deliberate action. But this is partly true.  Tax non-compliance can occur due to deliberate connivance or just ignorance.

Broadly tax obligations can be clustered into four groups: (a) registration in the system or deregistration from it (think of VAT for example); (b) timely filing or lodgement of requisite taxation information (filing tax returns for example); (c) reporting of complete and accurate information (incorporating good record keeping); and (d) payment of tax on time. If you abide by these, you are tax compliant. You breach any, you are non-compliant. Regardless of whether it is intentional or unintentional. A taxpayer may intentionally evade some of his or her obligations while unintentionally being non-compliant in other respects.

When it comes to administering penalties for non-compliance it is very difficult to distinguish whether a non-compliance action or inaction is deliberate or simply unintentional.  But in practice, inadvertent non-compliance with tax laws is widespread, especially within the SMEs and more so within the informal sector. So, what contributes to inadvertent non-compliance with tax laws? Of course, there are several possible reasons or factors.

Absence of tax management

Yes, just like any other aspect of your enterprise or organisation, you also need to manage your taxes. Tax management includes the understanding of the taxes that you are expected to comply, identifying the tax risks and putting in place effective controls to reduce both the possibility of non-compliance and the impact of non-compliance.  It is a process to respond to the tax risks and continuously evaluate the responses for improvement. For example, how you approach non-routine transactions will make a huge difference as far as tax compliance is concerned. Are you organised in such a way that you have enough time to prepare, review and pay tax liabilities? How does the board of directors of an organisation ensures that the tax affairs of their organisations are managed properly? Does the board know all taxes that their organization is obliged to comply? It is not uncommon to find out that some organizations do not even know all the taxes that they are required to comply. Arguably, most of the reasons for inadvertent non-compliance emanates from a lack of effective tax management.

Lack of requisite tax knowledge or information

Knowledge about taxes influences a taxpayer’s ability to comply with tax rules. As indicated earlier, the economic and behavioural models on tax compliance take tax knowledge as given, which may be grossly misleading. In practice, there is enough evidence that unintentional non-compliance is directly related to ignorance about and lack of understanding of tax laws.

The complexity of tax laws and rules

Tax complexity also influences non-compliance by causing misinterpretation of rules, omissions and unintentional errors. Making the tax system less complicated will lead to a reduction of tax non-compliance. Uncertainty from the interpretation of tax law is very common and may lead to unintentional non-compliance even for experienced tax experts.

Poor record-keeping

Inability to keep proper business records or lack of appropriate records about the business may lead to incorrect determination of the tax base and hence the tax liability. Due to lack of record, a taxpayer may end up paying less tax than they owe. Or even worse pay more than what is legally due. Lack of appropriate records also leads wrong, incomplete or misleading tax returns.

By Shabu Maurus, Tax Partner, Auditax International.

Tax Compliance Behaviour

Why some people don’t pay taxes - (2)

Shabu Maurus, Tax Partner, Auditax International.The higher the relative financial tax burden, the more likely a taxpayer may default. The costs associated with tax compliance, over and above the actual tax liability may also deter some taxpayers from compliance. Penalties, interest and fines for non-compliance may work but only for some time. Incentives for being compliant may have a longer positive effect. But it's not only the monetary or financial effects to a taxpayer that matters. Numerous behavioural factors also tend to influence tax compliance behaviour.

Individual differences: While many taxpayers comply with their tax obligations, some do not. Individual factors influencing behaviour include gender, age, education level, moral compass, industry, personality, circumstances, and personal assessment of risk. In his research on business tax compliance, economic psychologist Paul Webley found that those who do not comply tend to be male, younger, arrogant and have positive attitudes towards tax evasion and negative attitudes towards taxation authorities. Webley suggests that education about the taxation system has a direct impact on reducing the propensity to evade.

 

Social norms: Is tax non-compliance an acceptable norm? The “But everyone else is doing it” attitude.  If a taxpayer believes that non-compliance with taxes is widespread, they are much more likely not to comply themselves. Hence some studies indicate that if taxpayers can be made to have an accurate understanding of the good tax compliance behaviour of others, it is likely to reduce non-compliant behaviour.

 

Perceived inequity: Some taxpayers may believe ‘the system’ is unfair or they have personal experiences of ‘unfair’ treatment (dissatisfaction with tax authorities). Or that the system treats them unfairly compared to others, and that the government is doing too little with the revenue it collects. These taxpayers are less likely to comply with taxes.  In his research, Webley found a positive correlation between belief by taxpayers that the revenue authority is inefficient or unhelpful and the likelihood of their non-compliance.

 

Risk-taking: Some taxpayers view tax avoidance as a game to be played and won. They like to test their tax avoidance skills. Also, if a taxpayer has the opportunity not to comply and thinks that there is only a minimal risk of being detected, he or she will take the risk. Under-reporting of certain types of income is a typical example. Employment incomes (salaries and wages) are usually highly ‘visible’ to a tax authority because of employer reporting under the PAYE system. However, other forms of income may be much less visible and therefore subject to more ‘creative’ accounting.

 

There is no firm answer to what influences taxpayer behaviour either towards compliance or non-compliance. Hence an Australian academic Dr Valerie Braithwaite suggested that some economic and behavioural factors combine to cause individual taxpayers (individuals or businesses) to adopt sets of values, beliefs and attitudes that he described as motivational postures. There are four of them. Those who either deliberately evade their responsibilities or choose to opt-out (“The disengaged”). Also, some don't want to comply but who will comply if they can be persuaded that their concerns are being addressed (“Resisters”). But some are positive and are willing to comply but have difficulty in doing so and don’t always succeed (“Triers”). And lastly, there are those who are always willing to do the right thing (“Supporters”). Dr Braithwaite further cautions that an individual taxpayer can adopt any of these attitudes at different times. Or adopt all the attitudes simultaneously to different issues. Hence these attitudes are not fixed characteristics of a person or group.

By Shabu Maurus, Tax Partner, Auditax International.

Tax Compliance Behaviour

Why some people don’t pay taxes

Shabu Maurus, Tax Partner, Auditax International.What makes you pay your taxes voluntarily? Apart from tax payment, there are several tax compliance obligations under the tax laws. Broadly tax obligations can be clustered into four groups: (a) registration in the system or deregistration from it (think of VAT for example); (b) timely filing or lodgement of requisite taxation information (filing tax returns for example); (c) reporting of complete and accurate information (incorporating good record keeping); and (d) payment of tax on time. If you abide by these, you are tax compliant. You breach any, you are non-compliant.

But what sort of factors influence tax compliance (or non-compliance)? Understanding taxpayers behaviours and factors that influence compliance behaviour are crucial for a successful tax administration. But there are no hard and fast rules. The question has been a subject of numerous researches and it does not appear there is any firm consensus. Broadly the research literature identifies two broad approaches to the problem of compliance. Economic and behavioural approaches. Under these two, several factors emerge as significant in explaining or influencing tax compliance behaviours. I start with economic factors.

How big is the financial burden?

There appears to be a relationship between the amount of tax liability and taxpayer compliance behaviour. If a business owner or an individual has a tax liability that can easily be paid, likely, they may be willing to comply. But if the liability is perceived to be huge by the taxpayer and potentially threatening the viability of the business there is a good chance that the owner may avoid paying the tax. Avoiding the whole tax liability is one possibility. Another is to fraudulently adjust the data (for example, reducing sales or increasing expenses) such that a lesser amount of tax is paid.

What is the cost of compliance?

Taxpayers may face several costs of having to comply with their tax obligations over and above the actual amount of tax they pay. These include the time taken to comply with tax obligations, the cost of hiring and relying on accountants and tax consultants and the indirect costs associated with the complexity of tax laws. These can include ‘psychological’ costs such as stress that comes from not being certain that they have met all the tax rules or even knowing what those rules are. Record keeping and maintenance of documents may also be costly. The available methods of effecting tax payments may also come with a cost.  Also, taxpayers especially small businesses often express resentment about being ‘tax collection agents’ for taxes such as withholding tax and VAT. Think of when VAT is due for payment but as a taxpayer you have not or for some reasons you cannot collect the same from your customer.

Carrots or sticks?

Incentives: Are there rewards for being tax compliant? Some studies have shown that giving taxpayers incentives may have a positive effect on compliance behaviour (i.e. taxpayers becoming more compliant). I recall some few years back, TRA used to organize Taxpayers’ Day. Among other things, those who were considered as best taxpayers in various categories were rewarded. The RRA in Rwanda still has a similar practice.

Disincentives: The potential amount of interest, penalties or fines for non-compliance also tends to influence taxpayer compliance behaviour. Also, those who are compliant tend to want those who are non-compliant to be punished. However, studies of the impact of these financial deterrents as well as the threats of prosecution(s), suggest that they may have a time-limited effect on compliance behaviour of taxpayers.

By Shabu Maurus, Tax Partner, Auditax International.

IPSASB Publishes Exposure (ED) Draft 69

International Public Sector Accounting Standards Board has published ED 69 Amendment to IPSAS 41 Financial Instruments

Summary

On 27th August 2019, the International Public Sector Accounting Standards Board (IPSASB) issued an Exposure Draft (ED) 69 proposing some amendments to be made to IPSAS 41 Financial Instruments. The proposed amendment aims at ensuring representativeness and comparability of the information that a reporting entity provides in its financial statements.

Specific Matters for Comments

This ED does not cover statutory receivables and payables because they are considered to be non-financial instruments due to lack of contractual element. Further, it recognizes that concessionary loans and financial guarantee contracts issued through non-exchange transactions were addressed in the application guidance in IPSAS 41, therefore they do not form part of this ED.

In a nutshell, this ED covers monetary gold, currency in circulation, IMF quota subscriptions and Special Drawing Rights by proposing the following areas for comments;

1.    Monetary gold: Is gold bullion a financial instrument (like cash) or is it a commodity? Is monetary gold a financial instrument (like cash)?

IPSASB Perspective: IPSASB proposes that gold bullion is not a financial asset because it has no contractual right to receive cash although bullion is highly liquid. On the other hand, despite the fact that monetary gold also lack contractual rights to receive cash IPSASB considers them as financial assets since they meet many characteristics of financial assets.

2.    Currency in circulation: Does issuing currency as legal tender create a financial liability for the issuer?

IPSASB Perspective: IPSASB proposes that in determining whether financial liability is created or not, entities should consider existence of contractual obligation of which it shall be based on substance of arrangement rather than legal form. In addition to that, the said currency should be issued to evidence that two willing parties have agreed to the terms of the arrangement. That is to say unissued currency does not meet the definition of a financial instrument.

3.    Special Drawing Rights: Do Special Drawing Rights Holdings meet the definition of a financial asset? Do Special Drawing Rights Allocations meet the definition of a financial liability?

IPSASB Perspective: IPSASB proposes that both Special Drawing Rights Holdings (SDRH) and Special Drawing Rights Allocations (SDRA) meet the definition of financial assets and liability respectively on the ground that SDRH represent claims on currencies and liquidity is guaranteed by a mechanism requiring participants to deliver cash in exchange for SDRs. Similarly, SDRA represents a contractual obligation to deliver cash provided that SDR holdings are distributed to members.

Conclusion

Comments on the proposed changes are to be received by 31 December 2019.

For details on the exposure draft, see: Exposure Draft 69

IASB Issues an Exposure Draft on Disclosure of Accounting Policies

International Accounting Standards Board (IASB) has issued an exposure draft (ED) proposing some amendments to be made to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2.

Summary

The ED proposes amendments in IAS 1 by amending the requirement for reporting entities to provide disclosure regarding their ‘significant’ accounting policies and instead they shall only provide disclosure of ‘material’ accounting policies.

That is to say, the proposed amendments requires reporting entity to identify and disclose all material accounting policies that are more useful to primary users of financial statements and eliminate all immaterial accounting policies from the financial statements.

Further, IASB through exposure draft has provided guidance on applying materiality by introducing two new examples that highlight the need to focus on information that is material and useful to users of financial statements and demonstrate how the application of the four-step materiality process can address the issues of providing generic information or repeating the requirements of IFRSs on disclosure of accounting policies.

Disagreement

Although the proposed amendments are considered to be consistent with the application of materiality to other financial information, Mr Martin Edelmann one of the board member, voted against the publication of this exposure draft on the grounds that, provision of accounting policies disclosure are made to assist users of financial statements in understanding how transactions, other events and conditions are reflected in the reported financial statements. Further he argued that, not all primary users of financial statements are accounting experts hence the disclosure of accounting policies could help them to better understand an entity’s reported financial performance and financial position even if such accounting policies are not important enough to be assessed as material because they would not be expected to influence the investment decisions of users.

Therefore, according to Mr Martin Edelmann, consideration of materiality in disclosing accounting policies might lead to a loss of important information and hence impede users’ understanding of the financial statements.

Conclusion

Comments on the proposed changes are to be received by 29 November 2019.

For details on the exposure draft, see IASB proposes amendments to IFRS Standards to improve accounting policy disclosures

IPSASB Publishes Exposure (ED) Draft 68

International Public Sector Accounting Standards Board has published ED 68 on improvements to IPSAS, 2019

The objective of ED 68, Improvements to IPSAS, 2019 is to propose some improvements to existing IPSAS to provide solutions to issues raised by stakeholders. The table below summarizes the proposed improvements:

Amendments to Other IPSAS resulting from IPSAS 41, Financial Instruments

IPSAS

Summary of Proposed Change in ED 68

IPSAS 5, Borrowing Costs.

The amendments seek to update the guidance relating to the components of borrowing costs which were unintentionally omitted when IPSAS 41 was issued.

IPSAS 30, Financial Instruments: Disclosures

The amendments to IPSAS 30 are with regards to illustrative examples on hedging and credit risk unintentionally omitted when IPSAS 41 was issued.

IPSAS 30, Financial Instruments: Disclosures.

The proposed amendments to IPSAS 30 intend to update the guidance for accounting for financial guarantee contracts which were unintentionally omitted when IPSAS 41 was issued.

IPSAS 33, First-time Adoption of Accrual Basis International Public Sector Accounting Standards (IPSASs)

The proposed amendments to IPSAS 33 intend to update the guidance on classifying financial instruments on initial adoption of accrual basis IPSAS unintentionally omitted when IPSAS 41 was issued

 

Other Improvements to IPSAS

IPSAS

Summary of Proposed Change in ED 68

IPSAS 13, Leases

The proposed amendments cover appropriate reference to IPSAS in IPSAS 13 regarding impairment, in current references to other international and/ or national accounting frameworks.

IPSAS 13, Leases and IPSAS 17, Property, Plant and Equipment

The proposed amendments intend to remove transitional provisions supposed to be deleted when IPSAS 33, First-time Adoption of Accrual Basis International Public Sector Accounting Standards (IPSASs) was approved.

IPSAS 21, Impairment of Non-Cash Generating Assets  and IPSAS 26, Impairment of Cash Generating Assets

The proposed amendments aim at ensuring consistency of impairment guidance when accounting for revalued assets under IPSAS 17, Property, Plant and Equipment and IPSAS 31, Intangible Assets.

IPSAS 33, First-time Adoption of Accrual Basis International Public Sector Accounting Standards (IPSASs)

The proposed amendments to the implementation guidance on deemed cost in IPSAS 33 intends to ensure consistency with the core principles in the Standard.

IPSAS 40, Public Sector Combinations

The proposed amendments aim at including the effective date paragraph which was unintentionally omitted when IPSAS 40 was issued.

 

 

Kindly note that comments are requested by 30 September 2019.
 
For details on the exposure draft, see ED 68, Improvements to IPSAS, 2019.

 

TRA issues clarification on the usage of period of statements.

The clarification requires all banks to issue monthly periodic statements to their customers registered for VAT with the required particulars within ten days after the end of the month to which a tax period relates so as they can claim VAT charged by banks on financial transactions.  The periodic statements legally qualify as EFD receipts and are allowed to be used as evidence when submitting VAT monthly returns and claims.

The clarification is in line with the amendment made in Regulation 35(A) (1) of the VAT Act of 2018.

For details on the clarification refer to the above image.

 

 

 

 

TANZANIA BUDGET ANALYSIS 2019/2020

TANZANIA BUDGET ANALYSIS 2019/2020

The Minister of Finance unveiled the 2019/20 Budget on 13 June 2019. Below are some of the major tax reforms proposed by the Minister in the Budget Speech.

Tax Amnesty Extension:

For taxpayers who have been granted tax amnesty, they now have up to 31st December 2019 (instead of 30th June 2019) to settle their principal tax liabilities for which interest and penalty have been waived

  • This is a very commendable move given some delays in processing some of the tax amnesty applications.

Tax Dispute Resolution improved:

Two measures have been proposed

(a) Office of Tax Ombudsman at the Ministry of Finance, and

(b) Tax Objection Desk for disputes/complaints related to valuation or classification of imports

  • The success of these two measures will much depend on the extent of independence of those units, their expertise and resources.

Imports by individuals made simple:

The requirement to use clearing agents will no longer be mandatory for individual importers. The clearing process will also be simplified.

  • This may reduce the cost of importation to individuals but may also increase administrative costs to TRA in a short term.

Relief on female pads?:

(a) Corporate tax of 25% (instead of 30%) to apply for the first 2 years of operation to new investors in manufacturing of pads. Subject to a performance agreement with the government

(b) VAT exemption removed on supply of pads

  • Exemption or reduced income tax rate in the early years of production may not be an effective incentive. Most business will make losses in the first few years and may not be in a tax paying position anyway. VAT exemption does not always reduce prices to final consumers. Could there be some better non-tax incentives?

No immediate tax at TIN registration:

New taxpayers will now have up to six months before income tax on their business becomes due. No tax will be demanded when taxpayer applies for TIN.

  • What a great move! This will certainly give new taxpayers relief and focus their attention on building their new businesses at least for six months. But some anti-avoidance measures will also need to be in place to prevent abuse.

Excise duty:

No major changes on excisable goods and services. Duty reduced on wines made from local fruits from TZS200/L to TZS61/L. No duty on aircraft lubricants used by the national carrier and others per international agreements. Locally made artificial hair now to attract 10% duty and those imported 25%.

  • Some good news to aviation industry. Beauty will now be more expensive.

Stricter regulations on betting:

New system to be used to regulate both operators and players to mitigate negative social economic implications and also curb the revenue leakages.

  • Given the apparent boom in this sub-sector, this is a good move. Both economically and socially.

Customs:

A number of changes to protect local industries.

  • Protecting local industries is important and commendable. But that should go hand in hand with tangible controls to ensure efficiency. Otherwise we may be protecting inefficiencies and ultimately penalize consumers.

Nuisance levies scrapped:

In implementing the Blueprint for regulatory reforms, several levies and fees (e.g. imposed TFDA, Government Chemist, and TBS) are going to be scrapped.

  • This is a good start in implementation of the spirit of the Blueprint. Multiple fees, levies and taxes are not conducive to business.

Presumptive tax:

Several changes on sole proprietors with less than TZS 100 Million annual turnover.Presumptive tax at a maximum rate of 3.5% will now apply on individuals with turnovers of up to TZS100 Million (up from TZS20 Million). No requirement to submit audited accounts. Mandatory use of EFD to start from TZS14 million turnover. No tax if turnover is TZS 4million or less.

  • This is the boldest move. It will reduce both compliance and administrative costs. For lower bands, the tax rates have been reduced.

5 Years Driving Licence :

Drivers will now use their driving licences for 5 years (instead of 3 years) before renewing.This however comes with additional cost. Drivers will pay TZS 70, 000 to get their licences renewed (up from TZS 40, 000). Owners of cars and motorcycles will also pay more fee to register their vehicles from the current flat rate of TZS 10, 000. Motorcars (TZS 50, 000), Tricycles (TZS 30, 000) and Motorcycles (TZS 20, 000).

  • These reforms may not be palatable to the motorists.

 Conclusion:

The proposed reforms as presented in the Budget speech clearly show the intention to create an industrial economy and also implement the spirit of the Blueprint for regulatory reforms. We await to see how these and other tax reforms will be reflected in the tax laws (through the Finance Act, 2019 and the GNs).  

Tanzania Budget Analysis 2018-2019

TANZANIA BUDGET ANALYSIS 2018/2019

The Minister of Finance unveiled the 2018/19 Budget on 14th June 2018. 
Below are the 10 Key reform areas:

1. Tax Administration

A six months Tax Amnesty to start from 1st July 2018. 100% Interest and penalty to be waived if conditions are met.

  • This is a very commendable move in the tax system. There are a lot of preparations that tax payers will need to make to be able to fully take advantage of the amnesty. The tax health checks services provided by tax consultants will, more than ever, be very useful tool for taxpayers.

 

2. VAT Exemptions - packaging materials for pharmaceuticals, animal and poultry feeds additives, and sanitary pads.

  • Will this measure really lower the prices of medicines, and pads? The effectiveness of this measure is difficult to predict. Exemptions in the VAT system are generally not a good thing because of cascading effect.

 

3. VAT (Ministerial Powers) - extend the powers of the Minister of Finance to exempt materials procured for government projects or projects financed by non-concessional loans.

  • This needs a careful relook. The recent trend has been to reduce/remove ministerial (political) discretionary powers from the tax systems. Exemptions generally create opportunities for tax planning/avoidance. An ideal VAT system is in rem, tax on things.

 

4. Income Tax- reduce corporate tax rate of 20% to apply for the first 5 years of operation to new investors in leather and pharmaceuticals industries. Subject to a performance agreement with the government.

  • Exemption or reduced tax rate in the early years of production may not be an effective incentive. Most business will make losses in the first few years and may not be in a tax paying position anyway. Could there be better non-tax incentives?

 

5. Income Tax- no withholding tax to apply on interest paid by the government on non-concessional loans.

  • It may be difficult to discern the rationale of this measure. Is this intended to reduce the borrowing cost to the government? Or reduce the compliance costs that come with withholding obligations?

 

6. Excise duty- no major changes on local excisable goods and services. Duty has increased for imports.

  • This was unexpected move. A big relief to local producers and consumers of local beverages.

 

7. Gaming tax – sports betting now taxed at 10% of gross sales, each slot machine cost a tax of TZS 100,000 per month, casinos taxed at 18% of gross revenue, forty (40) machines sites now taxed at 20% of gross revenue.

  • Given the apparent boom in this sub-sector, this is a good move, both economically and socially.

 

8. Customs - a number of changes to protect the local industries.

  • Protecting local industries is important. But that should go hand in hand with tangible controls to ensure efficiency. Otherwise we may be protecting inefficiencies and penalize consumers.

 

9. Nuisance taxes – several levies and fees imposed by Ministries, Departments and Regions are going to be scrapped. Several fees/levies imposed by OSHA are being scrapped. Also scrapped are several levies and fees imposed on salt production.

  • This is a good start in implementation of the spirit of the Blueprint. Multiple fees, levies and taxes are not conducive to business.

 

10. Blueprint

This move to reform regulatory framework to create a business enabling environment.

  • The Blueprint has several reform proposals. The reforms  proposed in the Budget speech partly reflect recommendations in the Blueprint. But there are still many more reform areas. The big question is to what extent the Blueprint proposals will be implemented?

Conclusion:

The proposed reforms as presented in the Budget speech clearly show the intention to create an industrial economy. We await to see how these reforms will be reflected in the tax laws (through the Finance Act, 2018 and the GNs).

 

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