Commentary by yaofenjin


                        Overall review of the Finance Minister’s speech
Agriculture is the
key focus – “Kilimo     The global financial crisis provided       5%, to take effect from
Kwanza”!                the backdrop to this year’s Budget         2010/2011.
                        speech with the most affected
                        sectors identified as agriculture,     •   A number of VAT and customs
                        mining and tourism, as well as             duty changes to promote the
Adverse changes
for the Mining          manufacturing.                             dairy sector.
sector in relation to
taxes on fuel and       Agriculture was a particular focus     There was also explicit recognition
VAT.                                                           of the need to identify and survey
                        with a Budget theme / motto of
                        “Agriculture First” (or as spoken in   land for large scale food crop
                        Kiswahili “Kilimo Kwanza” for          farming to take advantage of the
VAT rate reduced        better alliterative effect).           existing opportunity in terms of
to 18%, but             Measures mentioned included the        local and world market demand.
concern over
treatment of
leased residential                                             Notwithstanding the dramatic
buildings.              •   A 30% increase in the              downturn in the global mining
                            budgetary expenditure              climate, there was no good news
                            allocation, to cover various       for the mining sector with a
                            initiatives including a drive to   number of adverse fiscal measures
7.5%increase in
specific excise
                            ensure timely availability of      announced including:
tariffs on alcohol,         agricultural inputs,
tobacco,                    strengthening of the Strategic     •   Removal of VAT special relief
carbonated drinks.          Grain Reserve, as well as              given to the mining sector,
                            improvement of the rural road          which will now be limited to
                            network, of irrigation                 cover only prospecting and
Significant                 infrastructure and of storage          exploration activities only.
revenue shortfall           facilities.                            This relief was never an
projected in the                                                   exemption in the sense of the
year to June 2009.      •   A number of measures to                Government giving up tax that
                            redress adverse impacts of             it could use, but merely a
                            the global economic crisis, for        means of mitigating cash-flow
Abolition of 405            example compensation of                costs for mining companies
Government                  losses incurred by crop buyers         that otherwise arise when VAT
Notices granting            such as in the cotton sector.          is paid on inputs, and then has
exemptions.                                                        to be refunded. The changes
                        •   A reduction of the cap / ceiling       made, which will increase the
                            on cess (a local Government            VAT refunds to the sector, will
                            tax) to 3% from the current
                                                     Tanzania Budget Review: Commentary          1
    adversely affect the cash-flow     One of the major announcements
    position of mining companies.      in this year’s Budget was the
                                       reduction of the standard VAT rate
•   Abolition of exemption of taxes    from 20% to 18%. This will be
    on fuel for mining companies,      appreciated by manufacturers
    other than fuel levy               selling into the domestic market,
    exemptions in existing Mining      who will also be relieved that the
    Development Agreements (in         increase in specific excise duties is
    the case of which it is stated     no higher than 7.5%, stated to be
    that the Government intends        the average inflation rate during
    to enter into a dialogue with      the period. Certain sectors of
    the mining companies with the      manufacturing will benefit from
    aim of amending the                reductions in customs duties on
    agreements to remove such          various inputs.
    exemptions). The implication
    from the speech appears to be      Other sectors to benefit from the
    that excise duty (unlike fuel      VAT rate reduction will be
    levy) is not protected by such
                                       businesses that make VAT exempt
    agreements – something that
                                       supplies - such as banks,
    may be a matter for debate.
                                       insurance companies, and fuel
    The overall economic concern
                                       retailers – as these businesses
    with loading these additional
                                       can not recover VAT input costs.
    tax costs is that it will
    discourage the exploitation of     So any reduction in VAT is a real
    more marginal ore bodies.          reduction in their costs.
    Irrespective of this, one would
    have thought that as a             For most transactions, VAT is a tax
    minimum an exemption would         only on the ultimate consumer.
    still apply for fuel used to       So, consumers will be the prime
    generate power, a cost only        beneficiaries of the reduction.
    incurred in the case of lack of    However, for individuals the
    infrastructure to connect to the   Budget is a mixed bag. Yes there
    grid, something that is no fault   is a VAT rate reduction, and limited
    of the relevant mine.              excise duty increases, as well as
                                       the removal of import duty on
For tourism, there was mixed           pharmaceuticals. On the other
news. Adverse changes include          hand, there is no increase in the
the removal of the VAT exemption       personal tax brackets. In addition,
on air charters. This sector will      there will be some anxiety as to
also be particularly affected by the   the possible adverse impact of
removal of the notion of “deemed       changes to the VAT treatment of
capital goods”, something that had     leased residential buildings as well
enabled the industry in the past to    as in relation to the removal of
import free of import duty and VAT     exemptions for charities and
a significant amount of material       NGOs, particularly given the role
required for setting up tourism        played by religious bodies in
facilities such as hotels. On the      relation to education and health.
plus side, there is the removal of
import duty from 4 wheel drive         An overriding concern for
vehicles specifically designed and     individuals and businesses is the
built for tourist purposes, and        reliability of projections for macro-
some rationalisation in relation to    economic variables such as
visa costs.                            inflation, lending rates and the
                                       exchange rate – especially, given
                                       the experience this year of a
                             Tanzania Budget Review: Commentary                2
significant revenue shortfall,         fuel, which is seen amongst other
estimated to be 10% short of           things as a means to curb evasion.
target, not to mention a general       Before commenting further on this
election on the horizon. In            proposal, it would be interesting to
addition, the Minister has             know what the practical cost
confirmed that the Government will     implications are of the introduction
borrow significant funds from the      of such a system.
domestic market, albeit that it is
stated that this will be done on a     In seeking to clamp down on
basis consistent with monetary         loopholes, the speech announces
policy requirements. One cushion       the immediate abolition of 405
for the coming year is the support     Government notices issued
committed by donors, which will be     between 1964 and 2005. It is not
30% up on the level of loans and       yet clear what the process will be
grants in the previous budget.         for publicising the revoked notices,
There is also a pledge from the        but one suggestion would be to
European Union and World Bank          have the relevant notices
to provide additional financing to     published on the internet so that
support agricultural food              taxpayers can assess the
production.                            implications, if any, for them.

In terms of revenue shortfall, the     The speech rightly emphasises the
greatest deficit has been on           importance of infrastructure and
Customs and Excise collections         makes reference to the planned
(21% down on budget), and whilst       finalisation of a national policy on
there is a commitment given to         Public Private Partnership in order
“continue strengthening                to enable the private sector to
supervision and operations in the      participate in infrastructure
Customs and Excise department”         projects. Hopefully, this will
there is no further articulation of    presage a more positive
how this objective will be achieved.   experience and engagement with
This is a matter for concern as        the private sector on infrastructure
Customs and Excise collections         projects.
were also below expectations in
the preceding year.                    This Budget speech was given
                                       against the very challenging
A significant contributor to           background of the global economic
Government revenues, but an area       crisis. By definition this
where there is an                      background has made the whole
acknowledgement of significant         planning process challenging.
evasion, is in relation to fuel.       Whilst we have queried certain
Again here there is a commitment       aspects of the proposals, the
to “strengthen monitoring of fuel      overall thrust of “Kilimo Kwanza” is
import by ensuring flow meters         one to be supported.
operate all the time” – which begs
the question, if the flow meter        This publication including the accompanying
system has not worked to date,         newsletters are provided by
                                       PricewaterhouseCoopers Limited for information
why do we believe it will work now.
                                       only and do not constitute the provision of
One controversial initiative for the   professional advice of any kind. The
sector, already much debated, and      information provided herein should not be used
restated in the Budget speech is       as a substitute for consultation with professional
the proposal to establish a fuel       advisers. Before making any decisions or
                                       taking any action, you should consult a
bonded warehouse using TIPER
                                       professional adviser who has been provided
facilities for bulk importation of
                            Tanzania Budget Review: Commentary                         3
with all the pertinent facts relevant to your
particular situation. No responsibility for loss
occasioned to any person acting or refraining
from action as a result as a result of any
material in the publication including the
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                                       Tanzania Budget Review: Commentary   4
The Economy
Highlights based on speeches by the Minister of
Finance and Economic Affairs on 11 June 2009.
Past Performance 2008/09                   Challenges ahead
The economy of Tanzania is                 Despite achievements in economic
estimated to have attained real GDP        growth and revenue collection some
growth of 7.4% during year 2008            challenges remain. These include:
compared with the growth rate of 7.1%
attained in year 2007.                     •   The effects of the current financial
                                               crisis have impacted agriculture,
The increased growth rates is                  investment, infrastructure and
attributed to an increase in economic          food security leading to a Tshs 1.7
activities in the following key sectors:       trillion stimulus package. This may
Agriculture (4.6%), Fisheries (5.0%)           entail a reduction in resources
and Services (8.5%). In addition,              available as funds are set aside to
significant growth was also observed           cushion the effects of the crisis. In
in communications (20.5%), financial           addition to the stimulus package,
intermediation (11.9%), construction           the government is looking into
(10.5%) and manufacturing (10%).               providing exemptions from various
                                               fees and levies. As a result this
The economy has experienced higher             will reduce the amount of
inflationary pressure as compared to           government revenue collected.
last year emanating primarily from the         The impact of this on donor
rise in food prices. The annual rate of        dependency in the future is yet to
inflation for 2008 was 10.3% as                be determined.
compared to 7% for 2007. The rate of
inflation reached 13% by the end of        •   The present infrastructure
March 2009. Monthly headline food              challenges leading to a lack of
inflation was 18.5% by the end March           power availability to meet the
2009.                                          demands of the economy, which,
                                               even at a reduced growth rate, are
In 2008/09, the Government planned             unlikely to be met by the available
to collect Tshs 4,728.6 billion in             generation capacity. This is an
domestic revenue. However, due to              issue that will require urgent
the global financial and economic              intervention by Government.
crisis, revenue collection by the end of
June 2009 is expected to fall short of     •   The execution of the budget faces
this target by 10 percent. Total               risks if prices of foodstuffs and
domestic revenue collected to end of           overall headline inflation continue
March 2009 was Tshs 3,199.1 billion.           to rise.
For 2009/10 domestic revenue
collection has been projected at Tshs
5,096 billion equivalent to 16.4% of

                           Tanzania Budget Review: The Economy                   1
Budget Objectives 2009/10                   In total, the budget revenues will be as
The 2008/09 budget will continue to                                   Tshs bn
implement national plans as stipulated
                                            Domestic Revenue             5,096
in the CCM Election Manifesto,
                                            Grants and Loans             3,181
National Development Vision 2025
                                            Domestic loans               1,082
and MKUKUTA. Unlike other years,
                                            LGA collections                138
this year’s budget is being
                                            Privatisation Proceeds           15
implemented during a time of
                                            Total Revenue                 9,513
economic and financial crisis.
Therefore, in order to mitigate the         Lowering donor dependence was a
effects of the crisis on the economy,       key theme in the 2008/09 budget. It
the budget will focus on improving and      was envisaged that recurrent
supporting the agriculture sector.          expenditure will be fully funded by
                                            domestic revenue. However, due to
The 2009/10 Budget                          the economic crisis, the revenue
Framework                                   target was not achieved. As a result,
                                            alternative financing sources were
The 2009/10 budget sets out the             explored including borrowing from the
following targets:                          domestic financial markets. A total of
                                            Tshs 559.6 billion worth of bonds were
•   GDP growth rate of 5% in 2009;          sold in the domestic market.
•   Control inflation at below 10% by       Donor dependency is expected to
    end of June 2010;                       grow for the upcoming year due to the
                                            economic crisis with an increase in
•   Contain the supply of M2 based          budgeted revenue from grants and
    on GDP, inflation and foreign           loans to comprise of 45% of the total
    reserves levels;                        annual budget of 2009/10.
•   To increase domestic revenue
    from 15.9% (estimated) of GDP in        Expenditure
    2008/09 to 16.4% of GDP in
                                            The Government is proposing to
                                            spend Tshs 9,513.7 billion in 2010/11
•   To base the rate of foreign             as follows:
    exchange on the movements in                                       Tshs bn
    the Inter-Bank Foreign Exchange         Recurrent                   6,688
    Market (IFEM);                          Development                 2,825
                                            Total Expenditure           9,513
•   To remove institutional barriers in
    the financial sector particularly       Government expenditure in 2008/09
    with regards to availability of loans   will focus on:
    to the private sector.
                                            •   Mitigating the impacts of the
                                                global economic crisis on the
Revenue                                         economy;
The budget policy measures on               •   Improving productivity in the
revenue are focused on domestic                 agriculture and livestock sectors;
revenue collection. For 2009/10
domestic revenue collection has been        •   Increasing population with access
projected at Tshs 5,096 billion                 to clean and safe water;
representing an increase of 7% on the
2008/09 target. The specific details of     •   Improving water irrigation;
the revenue enhancing measures are
set out in our highlights of tax            •   Improving health and education
changes.                                        services;

                                            •   Improving infrastructure;

                                            •   Developing industries;

                           Tanzania Budget Review: The Economy                    2
•   Research and development;               The interest rate on government
                                            securities declined from 11.4% in
•   Continuing decentralisation by          December 2007 to 10.99% in
    devolution;                             December 2008. The lending interest
                                            rates offered by commercial banks
•   Preparations for general elections      increased to 16.05% in December
    in 2010.                                2008 from 15.15% in December 2007.
The expenditure budget has been
allocated in the following manner for       Balance of Trade
key areas:
                                            The performance of the external
•   18.3% on the education sector;          sector was disappointing due to a
                                            continued increase in the current
•   7% on the agriculture sector;           account deficit, from US$ 2,041.6
                                            million in 2007 to US$ 2,333.6 million
•   11.5% on infrastructure;                in 2008 representing an increase of
                                            14.3%. The increased deficit was
•   10.1% on the health sector;             primarily driven by increases in the
                                            value of imports of goods and services
•   3.7% on the water sector;               compared to the value of exports.

•   3% on energy and minerals               The value of merchandise imports
    sector.                                 increased from US$ 4,860.9 million in
                                            2007 to US$6,439.9 million in 2008
                                            following an increase in importation of
Global economic crisis                      manufacturing, communication,
Broadly, the strategy adopted by the        transport and construction equipment
Government to address the effects of        in line with the growth of economic
the crisis includes daily surveillance      activities in the communication,
and supervision of banks conducted          transport and manufacturing sectors.
by the Bank of Tanzania to detect           In addition, there was considerable
problems in the banking system and          increase (15%) in service receipts in
implement prompt remedial actions.          2008 mainly driven by tourism,
Other measures include mobilisation         transportation and other services.
of domestic resources; improving            Travel (tourism) and gold receipts
productivity in the agriculture sector to   continued to dominate the export
increase food supply and therefore          sector accounting for 27 percent and
decreased food inflation; and               18 percent, respectively1.
promoting tourism (especially
domestic).                                  Despite the deficit, foreign reserves
                                            increased by 3.9 % to US$ 2,869.7
Credit and Money Supply                     million in 2008, from US$ 2,761.
                                            million in 2007. The reserves position
For the year ending December 2008,          in December 2008 was enough to
broad money supply grew at a rate of        cover 5 months of imports of goods
29.7% compared to 27% in December           and services.
2007. The growth rate of extended
broad money supply (M3) was 24% in          As at 31 December 2008, the national
December 2008 compared to 21.4% in          debt had increased by 7% from
December 2007. In March 2009, M2            US$5,891.1 million in December 2007
growth rate was at 14.4% compared to        to US$ 6,329 million. This is
25.4 % in March 2008. This slowdown         equivalent to 32.6% of total GDP
in the expansion of monetary                compared to 31.8% in 2007.
aggregates is mainly attributed to
slower growth of banks’ credit to the
private sector and net foreign assets
of the banking system. During March
2009, the growth rate of credit was
35.9% compared to 40.2% in the
previous year.                              1
                                             Bank of Tanzania, Monthly Economic
                                            Review, April 2009

                           Tanzania Budget Review: The Economy                   3
Sector policies and                         prices of major metals (with the
programmes to support                       exception of gold) have continued to
                                            decline. There have also been cases
budget initiatives                          of postponement of major investment
                                            projects for, e.g. a US$3.5 billion
Agriculture, Livestock,                     aluminium smelting project in Mtwara.
Forestry and Hunting                        This situation is mainly attributed to
                                            the global financial crisis. The
Economic activities in the above areas      Government will continue to undertake
grew by 4.6% in 2008 compared to            a number of reforms including a
4% in the previous year, boosted by         reform of the tax structure.
growth in crops; favourable weather
conditions in 2007/08; improvement in       Manufacturing
irrigation and rural road infrastructure;
and the fertiliser subsidy scheme.          The manufacturing sector grew by
                                            9.9% in 2008 compared to 8.7% in
However, there are general concerns         2007. The increase was attributed to
about the slow growth rate of the           sustainability in industrial production
agriculture sector and the impending        particularly for food and dairy
drought condition. This will                products; industrial chemicals;
significantly affect the extent to which    printing; and an overall increase in
poverty reduction and food security         manufactured exports. Going forward
targets can be met.                         the areas that will receive priority will
                                            include enhancement of local
The Government proposes a number            manufacturing capacity; value
of measures for 2009/10 to increase
                                            addition; and decrease of export of
productivity and growth in the              raw materials.
agricultural sector. These include
improvement in irrigation infrastructure
and rural roads; implementation of the
Agriculture Sector Development              In 2008, the construction sector grew
Programme (which includes increased         at a rate of 10.5% compared to 9.5%
use of fertiliser and improved seeds,       in 2007. This was driven by the
and the development of crop markets);       construction of roads and bridges,
and containing the adverse effects of       residential and non-residential
the global economic crisis on the           buildings and improvement in water
sector. Other areas include increasing      infrastructure.
the quality of products; improving
access to credit; increasing availability   Recognising the importance of
of farm inputs and reduction of             infrastructure for economic growth, the
unsustainable forest harvesting.            Government has continued to place
                                            considerable focus on construction in
Fishing                                     the upcoming year. As part of this
                                            commitment the Government has
Fishing activities grew by 5% in 2007       allocated 11.5% of the 2009/2010
compared to 4.5% the previous year.         expenditure budget to infrastructure.
This was attributed to increased
control over illegal fishing in Exclusive   Services
Economic Zones. However, overall
contribution of fishing to total GDP        Communications
decreased to 1.2% in 2008 compared
to 1.3% in 2007                             The communication sector grew by
                                            20.5% in 2008 compared to 20.1% in
Industry and construction                   2007, outpacing all other economic
                                            activities. This was due to an overall
Mining and quarrying                        increase in subscription rates
                                            particularly with respect to mobile
Mining activities continued a
downward trend. In 2008, the sector
registered a significant fall in growth     Transport
from 10.7% in 2007 to an all time low
of 2.5% in 2008. Furthermore, the

                           Tanzania Budget Review: The Economy                      4
Transport services grew by 6.9%               programmes; strengthening mother
compared to 6.5% the previous year.           and child health services (MCH); and
The increased growth rate was                 continuing to implement of national
attributed to increase in the volume of       HIV/AIDS programmes.
road transport cargo and international
air passengers. Increased priority will       Cross-cutting issues
be placed on improving transport
infrastructure in addition to creating        Aside from the sectoral activities, the
incentives to attract private sector          Government also plans to undertake
investment.                                   significant steps to address several
                                              cross-cutting issues that impact on the
Electricity and gas                           economy. These include:
In 2008, the total contribution by the        •   Raising awareness of the 2006
energy and gas sector to GDP                      National Population policy
reduced significantly to 5.4% in 2008             (particularly in light of the current
compared with 10.9% in 2007. This                 2.9% population growth rate);
was attributed to a decline in electricity
and gas generation; and the expiration        •   Continuing support of the
of key contracts such as Dowans,                  employment bureau established in
APR and Aggreko.                                  2009 as part of the National Policy
                                                  for Employment and its Strategy;
The medium term strategies include
increasing power generation                   •   Intensifying democracy by
particularly with regards to distribution         creating linkages between
and increased access in rural areas.              Employment Act CAP 343 and
In addition, the Government will                  Local Government Act CAP 292.
intensify efforts to establish national oil       In addition, the Government will
reserves facilities and expansion of              intensify efforts to improve the
gas production facilities at Songo                quality of the voter’s register;
Songo and Mnazi Bay.
                                              •   Publishing the results of the
Education                                         National Governance and
                                                  Corruption Survey by the end of
The growth rate in the education
                                                  June 2009;
sector was 6.9% in 2008 compared to
5.5% in 2007. This increase was               •   Improving the efficiency of the
mainly a result of the continued                  judiciary sector;
implementation of primary and
secondary education development               •   Implementing the Second Strategy
programmes, and increased                         for Preventing HIV/AIDS Infections
recruitment of teachers.                          in 2008 – 2012;
In the 2009/100 budget education is           •   Developing programmes for
allocated more funds than any other               empowering women economically,
sector (18.3%) reflecting the                     and strengthening gender focal
Government’s understanding that                   points at all levels;
education is the key to economic
development.                                  •   Continuing to implement the
                                                  National Environment
Health                                            Conservation Policy and its
Health services grew at 9.0% in 2008
compared to 8.8% in 2007. The
growth was based on the                       Conclusion
implementation of vaccination,                The budget for 2009/10 will be
malaria, tuberculosis, and HIV/AIDS           executed in a period where the global
programmes.                                   economic crisis has started to take
In 2009/10 the Government’s strategic         root in developing countries,
focus on the health sector will include       specifically in Tanzania. The
continued implementation of various           Government is considering several
public and primary health                     steps to mitigate some of the risks

                            Tanzania Budget Review: The Economy                       5
posed by the above challenges

•   An economic bailout plan;

•   Mobilisation of domestic resources
    and providing guarantees for
    loans in the agriculture and SME

•   Enhanced focus on the agriculture
    sector in general particularly with
    regards to improved irrigation
    infrastructure; input supply; market
    linkages and access to credit;

•   Instituting measures to increase
    the country’s attraction to
    investment and reducing the cost
    of doing business, for example via
    infrastructure improvements in key
    sectors such as power and

•   Increasing overall productivity and
    competitiveness of the economy.

Overall, the Government is moving in
the right direction by investing in areas
that will pave the way to sustainable
development. However, the success
depends on our capacity to implement
various initiatives in driving these
policies at implementation level. In
addition, the increase in dependency
on grants and loans as demonstrated
in the current budget may further
exacerbate our inability to adequately
maintain the effects of the global


                           Tanzania Budget Review: The Economy   6
                     Tax Changes
                     Highlights based on the Finance Minister’s speech

25% income tax       Income Tax                              been reduced from 20% to 18%.
rate for                                                     The reason given for this reduction
companies listed     Surprisingly there is only one          is to minimise the impact of the
on DSE with at       change to the Income Tax Act.           global economic crisis on the local
least 30% of
                     This is the proposal to reduce the      economy. Though a lower rate
shares publicly
                     corporate tax rate for companies        would have been preferred (say
                     listed on the Dar es Salaam Stock       15%), the 18% rate is at least in
                     Exchange (DSE) from 30% to              line with one other EAC country
                     25%. To qualify, at least 30% of        (Uganda). In any case there was
                     the company’s shares must be            considerable pressure on the
                     issued to the public. This change       Minister to reduce the VAT rate as
                     was actually introduced in 2006         Tanzania had the highest rate in
VAT rate             but limited to the first three years    the region and one of the highest
reduced to 18%       following listing and applicable to     in Africa (only Cameroon’s was
                     companies having at least 35%           higher!).
                     shares issued to the public.
                                                             The Minister did not elaborate on
                     This is intended to encourage           transitional provisions to achieve a
                     companies to list on the DSE and        smooth move to the 18% rate.
Fuel taxes
                     broaden their public ownership.         Experience from other jurisdictions
special relief for   However, it is not clear whether        shows that there will be a need for
mining               this change will apply to newly         detailed transitional provisions (on
companies            listed companies only or will also      tax points, credit notes, treatment
abolished            cover the existing companies            of continuous supplies of services,
                     whose shares are already floated        deposits, etc) to go hand in hand
                     on the DSE. In addition, it is not      with the change in rate thereby
                     clear whether the intention is for      ensuring that disputes do not arise
                     the new rate of 25% to apply for        with the TRA. We therefore hope
                     the first three years as it is at the   that such transitional provisions
Lease of             moment or to apply in perpetuity.       are included in the final legislation.
houses now
subject to VAT                                               In a real sense the prices of all
                     Value Added Tax                         VATable goods and services
                                                             should go down by just under 2%
                     Change of rate to 18%                   so in theory people should pay
Inflationary                                                 less. In the UK, a recent 2.5%
adjustment to        Finally we will see the VAT rate        VAT rate reduction boosted retail
excise duty on       being reduced. The VAT rate has         turnover by £2.1bn in the first three
alcohol, beer
and cigarettes                                     Tanzania Budget Review: Tax Changes            1
months according to Alistair           The key reason is to ensure that
Darling. However it is unlikely that   there is no VAT leakage on the
prices will go down in the short       value added by super dealers.
term for several reasons.
Firstly, the change in rate will
result in a not insignificant          New exemptions
administrative burden for retail
businesses having to change their      From an economic efficiency
price labels and computer              perspective, a moderate VAT rate
systems, and this will entail some     with a broad consumption base
additional cost.                       and few exemptions is always
                                       preferred to a high rate with many
Secondly, the change will have a       exemptions. Unfortunately we
relatively small impact on prices      seem to be doing a mixture of the
and many businesses may simply         two i.e. we have decreased the
not bother to change their prices.     VAT rate but keep on increasing
For example on an item currently       the number of exemptions.
selling for Tshs 1,200, the VAT
rate reduction will theoretically      The following exemptions have
result in the price being reduced to   been introduced:
Tshs 1,180 i.e. a change of only       • Heat insulated milk cooling
Tshs 20.                                   tanks and aluminium jerry
                                           cans used for storage and
Thirdly, many businesses are not           collection of milk in the dairy
VAT registered, even when                  industry. The aim is to
perhaps they should be. So if they         promote their use for hygienic
are not charging VAT at all then           collection of milk thus
the rate change becomes                    improving the quality of milk.
academic. At the same time                 This also is in line with the
however, a lower rate may                  import duty exemption and the
encourage more businesses to               treatment across EAC
comply and become registered.              countries.

Finally, on excisable goods, there     •   Farm services of land
is an increase in excise duty so           preparation, cultivation,
some of the VAT savings will be            planting and harvesting. The
offset by an increase in excise            aim is to reduce production
duty.                                      costs in agriculture.

                                       •   Stevedoring services for
                                           imported cargo in relation to
Other general changes
                                           local vessels where VAT has
                                           been applied to the
Another change is the proposal to          stevedoring on initial
start charging VAT on mobile               disembarkment. The stated
phone services on the face value           aim is to encourage importers
of the vouchers at source and not          to use Tanga and Mtwara
on the discounted value at which           ports in substitution for Dar es
the vouchers are sold to                   Salaam, but the practical
wholesalers. This proposal is in           application is a little unclear.
line with the treatment in Kenya
which came in 2006. It remains to
be seen whether a similar
approach will be taken by the TRA.     Removal of exemptions

                                       The following exemptions have
                                       been abolished:

                            Tanzania Budget Review: Tax Changes             2
•   Exemption for air charter                   their rent is relatively
    services (though it is not clear            modest. The key
    whether this will extend to                 determinant will be
    tourist charters).                          whether the landlord is
                                                above the VAT threshold,
•   Exemption for processed                     rather than the value of the
    locally grown tea and coffee.               individual tenant’s rent.
    This is a surprise change as it
    was only introduced in 2004                 From a practical
    and 2006 respectively.                      perspective, Tanzania
    Although the suppliers will                 currently is the most
    now be able to claim the VAT                expensive country in the
    on their inputs, the prices of              East African region in
    these products are                          terms of leased residential
    nevertheless likely to go up                property and this change
    significantly.                              would appear to only make
                                                the situation worse.
•   Exemption on electronic cash
    registers.                          It is notable that we have been
                                        unable to identify any other country
•   Exemption on leased buildings       in the world that imposes VAT on
    and serviced apartments             residential accommodation.
    (except for lease of residential
    buildings by the National
    Housing Corporation and             New special relief
    Registrar of Buildings)
                                        The special relief granted to
    Although the Minister has
                                        Tanzania Defence Forces duty
    stated that most residential
                                        free shops has been extended to
    houses will not be captured as
                                        include all Armed Forces. This will
    the landlords will not be VAT
                                        now include police and prison
    registered, it only takes
    someone to lease two
    residential houses at US$
    1,500 per month each to
    trigger the need for VAT
                                        Removal/Amendment of
    registration (based on the          special relief
    registration threshold of Tshs      The minister has proposed the
    40 million).                        abolishment or restriction of
                                        existing VAT special relief as
    Potentially a number of             follows:
    practical problems might arise:
                                        •   Limiting the special relief
       There may be a need to               provided to water and
       register many new taxable            sewerage authorities to only
       persons before the end of            cover goods and services
       June. This will increase             used for water and sewerage
       TRA’s administration                 infrastructure development
       costs, and presumably                (currently this applies to all
       compliance costs also as it          goods and services used in
       is likely that there will be a       the performance of the
       degree of evasion in this            authority’s statutory functions)
                                        •   Limiting the special relief given
       More importantly, the                to mining companies to
       change could easily result           prospecting and exploration
       in increased rent costs for          activities only. Although this
       many people, even where
                            Tanzania Budget Review: Tax Changes               3
    has no impact on the               Removal of Excise Duty and
    Government’s VAT revenue,          Road and Fuel Toll (Fuel
    the main effect will be to         Levy) Exemptions to Mining
    increase the size of VAT           companies
    refund claims. Given the
    lengthy delays already
                                       The excise duty and road and fuel
    experienced in receiving
                                       toll exemptions granted to mining
    refunds from the TRA, the
                                       companies have been abolished.
    delays are only likely to get
                                       For road and fuel toll, the removal
                                       will only affect companies entering
    Bearing in mind that most          into a Mining Development
    mining projects rely               Agreement (MDA) with effect from
    significantly on bank lending,     1 July 2009. The intention however
    any delay in receipt of funds      is to also apply the abolition to
    will effectively result in extra   companies with existing MDAs by
    interest costs. Notwithstanding    means of MDA renegotiation. It is
    the law on this matter, TRA        understood that this move is
    are not in the habit of paying     consistent with the
    interest on late refunds.          recommendations of the Bomani
                                       Committee and so may not come
The following special reliefs have     as a great surprise to those in the
been abolished:                        sector. However we have some
                                       misgivings about the impact on
•   Supply of inputs, raw and          Tanzania’s ability to attract new
    packaging materials for            investment in this sector.
    manufacture of human
    medicines. This will have an
    effective operational date of 1    Excise Duty
    January 2010 and will put
    pharmaceutical manufactures        Mobile phone airtime
    in a VAT refund position as
    their products are zero-rated.     The excise duty on mobile phone
                                       services will now be charged at the
•   On charitable community-           point of sale of scratch cards
    based; or other non-profit         (vouchers) at their face value
    driven organisations or            unlike currently where it is charged
    institutions and religious         at the point where the actual use of
    organisations. This is likely to   air time occurs.
    impact negatively on these
    organisations as they are          While this change will strengthen
    normally not registered for        the Government’s cashflow
    VAT and therefore will not be      position, it is also likely to cause a
    able to claim the VAT charged      lot of practical problems and
    on their inputs.                   confusion to the mobile phone
•   On deemed capital goods. In        operators. With the advancement
    the past, goods imported by        of technology, mobile phone
    investors registered under the     operators now provide many
    Tanzania Investment Act for a      services in addition to airtime
    specific investment project        (such as data, internet services
    could be deemed as capital         and money transfers). Many of
    goods and therefore entitled to    these services require the use of a
    VAT special relief.                common scratch card. The
                                       legislation only imposes excise
                                       duty on “mobile phone air time”
                                       and this raises serious questions
                                       such as how the mobile company
                            Tanzania Budget Review: Tax Changes             4
is meant to allocate the scratch          Excise duty on cigars remains at
card value between airtime and            30%.
other non-excisable services.

                                          Customs Duty
                                          The list below summarises
Excise duty on beverages has              products which will now attract 0%
been increased in line with               import duty.
average inflation (7.5%).                 •   Heat insulated milk cooling
                                              tanks for dairy industry
    Goods            Old        New
                     Rate       Rate      •   Industrial spare parts
                    Tshs       Tshs
                    Per ltr    per ltr    •   Four wheel drive vehicles
Carbonated          54.00      58.00          specially designed and built
soft drinks                                   for tourist purposes
Clear beer          194.00    209.00      •   Equipment and inputs
(unmalted                                     (excluding motor vehicles)
                                              imported by a licensed
Malt Beer           329.00    354.00          company for direct and
Wine with          1,053.00   1,132.00        exclusive use in oil, gas or
more than                                     geothermal exploration and
25% imported                                  development
Spirits            1,561.00   1,678.00    •   Raw materials used in the
                                              manufacture of sanitary
                                              towels and tampons
Cigarettes                                •   Heavy trucks of more than 20
                                              tons under HS code
Similar to beverages, the rates for
cigarettes have also been
increased by 7.5%.                        •   Synthetic yarn

   Goods          Old Rate    New Rate    •   Pharmaceuticals
                   Tshs         Tshs
Cigarettes        5,348 per   5,749 per
                                          •   Crude palm oil
without filter,   mil         mil
                                          •   Asbestos fibers of HS codes
more than                                     6812.8.00 and 8812.99.00
75%                                           used in manufacture of brake
domestic                                      linings and pads
                                          •   Television cameras, digital
Cigarettes        12,618      13,564
                                              cameras and video camera
with filter,      per mil     per mil
                                              recorders of HS code
more than                                     8525.80.00
Other             22,915      24,633
cigarettes not    per mil     per mil
Cut rag/filler    11,573      12,441
                  per kg      per kg

                               Tanzania Budget Review: Tax Changes           5
Other amendments of import                 Cancellation of Government
duty rates                                 Notice tax exemptions

The Minister has proposed                  The Minister announced plans to
changes to the import duty rates           revoke 405 existing Government
on the following products.                 Notices providing specific tax
                                           exemptions to various companies
                                           and organisations. Although not
     Goods            Old        New
                     Rate %     Rate %     explicitly stated, this may only
                                           apply to GN’s issued prior to 2006.
Worn clothing         45% or     35% or    Where a revoked GN is still
                      30 US      20 US     required, the beneficiary will be
                     cents/kg   cents/kg   required to apply for a new GN in
                                           accordance with current laws and
Yoghurt and            25         60
other butter milk
                                           procedures. We anticipate that
of HS codes                                this may not be an easy exercise
0403.10.00 and                             in practice.
Light trucks of at     25         10
least 5 tons
under HS code

•    Import duty remission has
     been granted on raw materials
     for use by paper and
     paperboard mills.

•    Tanzania to continue to apply
     CET rate of 10% instead of
     35% applied by other partner
     states in EAC on wheat grain
     of HS codes 1001.90.20 and

Local Government Finance

The cap for charging produce cess
has been reduced from 5% to 3%.

This change will be welcomed by
farmers but will only be
implemented in the 2010/2011
fiscal year to enable local
governments to look for alternative
sources of revenue.

                                Tanzania Budget Review: Tax Changes          6
                   East African Highlights
                   A synopsis of the salient features in the budget
                   speeches delivered by the Finance Ministers of
                   Kenya, Tanzania, Uganda and Rwanda

                   East African economies at a                  The budget is expansionary, with
                                                                increased expenditure in
                   glance                                       infrastructure and social projects.
Kenya records a                                                 There will be no increase in taxes
                   Kenya                                        and the Government expects to
decline in
economic growth    The economy experienced a                    finance the shortfall through savings
from 7% to 1.7%    downturn in 2008, growing by 1.7%            from rationalisation of government
                   compared to 7% in 2007. The                  expenditure and increased domestic
                   reduced growth was due to the                borrowing.
                   adverse effects of the events that
Development        followed the December 2007                   Infrastructure is the key priority area
Funds allocated    general elections, sharp increase in         with an allocation of KShs 140
more money         the international prices of oil and          billion, but there are doubts about
                   fertiliser and the drought conditions        its absorption.
Tanzania records   following failed short-rains.
a 7.4% economic
growth rate in                                                  Tanzania
2008               The expected growth for 2009 is
                   only 3% due to the effects of the            Agriculture is a key focus area for
                   global recession.                            the 2009/2010 budget with a motto
                                                                of “Agriculture First”. Amongst a
                                                                number of the measures planned
                   The theme of the 2009/2010 budget
                                                                are the allocation of more
                   is “Overcoming today’s
                                                                resources, including agro-inputs
                   challenges for a better Kenya
                                                                and farm implements, and the
                   tomorrow” and aims at providing
                                                                establishment of an Agricultural
                   economic stimulus. It also provides
                   for more devolution of expenditure
                   compared to prior years, with more
                   funds being channelled through the           The economy grew by 7.4% in the
                   Constituency Development Fund                calendar year 2008 compared with
                   (CDF). This is aimed at achieving            7.1% in 2007. However, in view of
                   greater equity and increasing the            the current global economic and
                   efficiency of spending.                      financial crisis, the Minister projects
                                                                a reduced growth of 5% for the
                                                                calendar year 2009. This in line with

                                                    Tanzania Budget Review: East African Highlights

                   an IMF projection of a growth of                 Rwanda
Uganda projects    between 5% and 6%.
a decline in                                                        This was the first Government
economic growth                                                     budget that conforms to the East
in 2009/10 to 6%   Uganda                                           Africa Community (EAC) budget
from 7% in the                                                      calendar.
previous year      Uganda Government continued to
                   pursue its macro-economic
Rwanda records     objectives and achieved an                       The economy grew by 11.2%
an impressive      economic growth rate of 7% per                   mainly due to good performance in
11% economic       annum, ensuring a competitive                    agriculture, growth in the industry
growth rate in
                   exchange rate and maintaining                    sector with improvement in
                   adequate foreign exchange                        electricity supply and growth in the
                   reserves.                                        financial services, transport and
                                                                    logistics sectors.
                   The effects of the global financial
                   crisis are expected to continue in               The current global economic
                   FY 2009/2010 and the growth                      environment is expected to reduce
                   projection is estimated to be 6%.                demand for exports such as tea and
                                                                    coffee and reduced income and
                                                                    revenues from tourism.

                   Key highlights from the Kenya, Uganda, Tanzania and Rwanda
                   Key indicators of the performance of the East African economies are set out
                   below. Where applicable, prior year comparatives have been included in

                                                 Kenya              Uganda          Tanzania         Rwanda

                   Real GDP growth               1.7% (7%)          7.0% (8.9%)     7.4% (7.1%)      11.2% (*na)


                   λ       Underlying            9.8% (5.7%)        12.6% (8.6%)    *na              *na

                   λ       Overall               26.07% (9.8%)      13.5% (11.2%)   10.3% (7%)       *na

                   91 day TB rates               7.3% (6.87%)       7.4% (8.2%)     10.99%           *na

                                                 KShs               UShs            TShs             RwF

                   Exchange rate to the dollar   79                 2,216           1,196            577
                   (Local currency = US$1)       (66)               (1,679)         (1,244)          (589)

                   Budgeted spend (billions)     865.6 (759.8)      *na (6,143)     9,513 (7,216)    823 (657)

                   Recurring                     606.7 (563.6)      *na (3,372)     6,688 (4,726)    475 (395)

                   Development                   258.9 (196.2)      *na (2,771)     2,825 (2,489)    348 (262)

                   *Not available

                                                        Tanzania Budget Review: East African Highlights

Import duty rates    Customs and Excise                            Tanzania
in EAC removed
on certain goods
                     East African Community                        Changes specific to Tanzania to
                                                                   conform to the EAC Customs
Kenya removes        There are Common External Tariffs             Management Act and Common
duty on inputs for   that are applied to goods imported            External Tariff and as agreed by the
use by paper                                                       EAC Ministers for Finance, include:
                     into the EAC. The following are
                     some of the proposals made in
                                                                   λ   Tanzania to remove the 10%
Tanzania to apply    respect of these tariffs that are
                                                                       import duty on pharmaceuticals
10% duty on          common to all the EAC countries:
                                                                       and start applying the CET rate
imported wheat                                                         of 0% and
                     λ   Exemption of import duty on all
                         industrial spare parts to be              λ   dispensation to Tanzania to
Uganda extends
duty exemption           managed through the duty                      apply a 10% duty rate on
on hotel                 remission scheme;                             imported wheat grain instead of
construction         λ   exemption of import duty on all               the 35% CET rate.
                         four wheel drive vehicles
Rwanda                   specially designed for tourist            Uganda
introduces three         purposes;
tariff bands for
                     λ   import duty on television                 Proposal to extend the exemption of
import duty                                                        import duty on construction
                         cameras, digital cameras and
                         video camera recorders                    materials for hotels, health and
                         removed;                                  educational institutions for another
                                                                   one year.
                     λ   Import duty exemption on
                         equipment used in oil, gas or
                         geothermal exploration and                Reduction of import duty from 25%
                         development; and                          to 10% for trucks of a carrying
                     λ   exemption of import duty on heat          capacity of over five tons, for one
                         insulated milk tanks.                     year.

                     However, there were some changes
                     unique to each of the East Africa             Reduction of import duties on trucks
                     Community countries as follows:               of 20 tons or more have been
                                                                   reduced from 20% to 0%.

                     Import duty on wheat increased
                     from 10% (or US$ 50 per tonne) to             Excise duty on airtime increased
                     25%.                                          from 3% to 5% as initially agreed
                                                                   with the players in the sector to
                                                                   progressively adjust upwards the
                     Import duty on raw materials for              rate rather than a one-off shift in the
                     manufacture of paper packaging                tax rate.
                     and sanitary towels removed.
                                                                   The Government of Rwanda
                     Import duty on all synthetic yarns,           committed to start implementing the
                     acrylic yarn, polyester yarn and high         EAC Common External Tariff with
                     ferocity yarn reduced from 10% to             effect from 1 July 2009. This implies
                     0% in the cotton industry.                    that the customs tariff band will
                                                                   change from four tariff bands to
                     Goods, including materials supplies,          three tariff bands with the highest
                     equipment and motor vehicles for              tariff rate of 25% from 30% for
                     official use in the provision of relief       finished products, 10% from 15%
                     services by the Kenya Committee of            for intermediate goods and 0% from
                     Red Cross exempted from duty.                 5% raw materials. The 0% for
                                                                   capital equipment will no longer be

                                                       Tanzania Budget Review: East African Highlights

The following tax policy measures
have been agreed at the EAC level
and have been proposed to in the
2009/2010 budget:

λ   Remission of Common External
    Tariff (CET) on wheat grain at
    0% for one year;
λ   CET rate for asbestos fibres
    reduced from 25% to 0%;
λ   import duty for yarn reduced
    from 10% to 0%;
λ   Rwanda to stay application of
    CET of 75% on rice and apply a
    duty rate of 30% for a period of
    two years;
λ   import duty reduced from 25% to
    10% for trucks of carrying
    capacity of five tonnes and
    above for one year;
λ   import duty reduced from 25% to
    0% on trucks of carrying
    capacity of over 20 tonnes for
    one year; and
λ   CET for kerosene stove to be
    reduced from 25% to 10%
    Exportation of scrap aluminium,
    steel, copper wires and cables

                               Tanzania Budget Review: East African Highlights

                                                                  Excise duty on wines changed from
                    Direct and indirect taxes                     KShs 7 per 1% of alcohol to KShs
                                                                  70 or 50%, whichever is higher.
Generous capital    Corporate tax                                 VAT
introduced in       100% investment deduction on                  The following have been zero rated
Kenya               capital expenditure incurred by a             for VAT purposes:
                    film producer on purchase of filming
Tax losses in       equipment.                                    λ   Taxable goods and services
Kenya will now                                                        offered to film producers;
be carried                                                        λ   power generators and
forward for five    Wear and tear allowance on                        generating sets; and
years only          telecommunication equipment                   λ   refrigerated trucks and parts for
                    increased from 12.5% to 20%.                      agricultural, horticultural and
Excise duty on                                                        forestry machinery.
water reduced
from 10% to 5%      Tax deduction of 5% on computer
                                                                  The following have been exempted
while on            software.
                                                                  from VAT:
carbonated soft
drinks and juices                                                 λ   Mobile phone sets and
the rate reduced    150% investment allowance on
from 10% to 7%.     substantial investment in satellite           λ   financial services, regardless of
                    towns around Nairobi, Mombasa                     supplier.
Mobile phones       and Kisumu.
now zero rated                                                    Given the problem faced by traders,
for VAT in Kenya                                                  VAT withholding agents are now
                    Tax losses claimable, but not to              required to issue a VAT withholding
                    exceed a five year period, unless             certificate to their supplier at the
                    approval is provided by the                   time of making payment.
                                                                  Claim period for relief of tax paid on
                    With the landing of the undersea              goods in stock for newly registered
                    cables in Kenya, the Minister has             taxpayers for VAT purposes
                    proposed that the cost incurred in            extended from 30 days to six
                    acquiring the right to use fibre optic        months.
                    cable be offset against taxable
                    income over 20 years.
                                                                  Exporters who qualify for zero rated
                                                                  supplies to get supplies zero rated.
                    Personal tax

                    Tax exempt limit for pension                  Tanzania
                    increased from KShs 15,000 to
                    KShs 25,000 per month.                        Corporate taxes

                                                                  Reduction in threshold to qualify for
                    Quarterly filing of PAYE returns in           reduced 25% corporate tax rate for
                    addition to the one filed in February         companies listed on the Dar es
                    each year.                                    Salaam Stock Exchange – in
                                                                  particular, criterion for qualification
                                                                  is shares issued to the public for at
                    Excise duty
                                                                  least 30% of share capital (instead
                    Excise duty on water reduced from             of previous 35%).
                    10% to 5%, while on carbonated
                    soft drinks and juices the rate               Personal taxes
                    reduced from 10% to 7%.
                                                                  No change to individual tax
                    Excise duty on spirits changed from
                    KShs 7 per 1% of alcohol to KShs
                    120 or 65% whichever is higher.

                                                      Tanzania Budget Review: East African Highlights

Excise duty                                  The Minister also proposes to
                                             extend the VAT exemption on
Excise duty rates on non petroleum           construction materials for hotels and
products have been increased by              health and educational institutions
7.5%, which was considered to be             for another year.
the average inflation rate for the
                                             All lease transactions relating to
                                             items that are VAT exempt will also
Abolition of excise duty exemption           be VAT exempt. Prior to this, the
granted to the mining companies.             VAT exemption only applied to the
                                             outright sale of assets and not to
VAT                                          the lease of the same assets.

Reduction of the VAT rate from 20%           VAT of 5% applied on sale of
to 18%.                                      houses has been abolished and
                                             house sales will be exempted from
VAT special relief given to mining           VAT.
sector now limited to cover only
prospecting and exploration

Removal of the VAT exemption for
leased residential buildings (except
for leases by NHC and the Registrar
of Buildings) and serviced
apartments. In addition, VAT
exemption on processed tea and
tobacco has been removed.

Direct taxes

Exemption for all agro processing

Amendment of the Income Tax Act
to cater for Petroleum Transactions.

Excise duty

In order to promote growing and
malting of barley in Uganda, the
Minister has proposed to reduce
excise duty on beer produced from
barley grown and malted in Uganda
from 60% to 40%.


To ease the challenges associated
with counterpart funding, donor
funded projects in agriculture,
education and health sectors have
been exempt from VAT and all VAT
arrears relating to these projects are
to be written off.

                                 Tanzania Budget Review: East African Highlights

                                                                  Tax on life business now based on
Concept of           Miscellaneous                                the sum of the recommended
branchless                                                        surplus to be transferred arising
banking              Kenya                                        from an actuarial valuation less any
introduced in                                                     previous actuarial deficits. It also
Kenya                Banking                                      now excludes the 30% ‘excess’
                                                                  management expenses that was
Cost of listing on   Proposed amendment to the Kenya
                                                                  previously chargeable.
NSE reduced          Post Office Savings Bank Act to
                     allow Postbank to transact in foreign
Ownership rules      exchange business in accordance              Other
for insurance        with the CBK rules and regulations.
companies                                                         Sugar development levy on
amended in                                                        industrial sugar removed under the
Kenya                Branchless banking proposed,                 duty remission scheme.
                     where banks will now be able to
405 Government       operate through agencies with wide
licences in          distribution networks.                       Ban on exportation of scrap
Tanzania revoked                                                  aluminum, steel and copper wires
                                                                  and cables.
                     Capital markets

                     Minimum share capital for stock              Amendment of the penal code
                     brokers and investment banks to be           proposed to outlaw the operations
                     increased from KShs 5 million and            of pyramid schemes including non-
                     KShs 30 million to KShs 50 million           genuine multi-level marketing
                     and KShs 250 million respectively.           operations.

                     Institutions under the Capital               Minimum funding for defined benefit
                     Markets Authority required to                schemes increased from 80% to
                     secure professional indemnity                100% of the value of accrued
                     insurance.                                   liabilities.

                     Withholding tax on interest on               New investments by pension
                     bonds maturing within 10 years or            schemes that receive statutory
                     more reduced from 15% to 10%.                contributions to be put in
                                                                  Government securities and
                                                                  infrastructure bonds issued by
                     Listing fee reduced from 0.3% to
                                                                  public institutions.
                     0.15% for new public offers of
                     Stock brokers and investment
                                                                  Abolition of the fuel levy exemption
                     bankers now required to publish half
                                                                  for mining companies entering into
                     year financial statements.
                                                                  Mining Development Agreements
                                                                  from 1 July 2009. Government
                     Agents restricted to one stock               initiating contract negotiations with
                     broker.                                      existing mining companies to
                                                                  remove the specific provisions
                                                                  granting this exemption in existing
                     Insurance                                    Mining Development Agreements.

                     Shareholding by a single person in           Cap on “cess” (local Government
                     an insurance company restricted to           taxes on agriculture) to reduce to
                     25%.                                         3% from current 5%, but not until
                     Any person owning more than 20%
                     of the shares in an insurance                Revocation of 405 Government
                     company restricted from day to day           notices which grant tax exemptions.
                     management of the company.

                                                      Tanzania Budget Review: East African Highlights

Reduction of visa fees for all
categories of visitors to US$50.

Total ban on plastic bags as a
means for conveyance of goods
and liquids is imposed to protect the
environment. Six months will be
given to the general public to find
alternative means of packaging.

Environmental levy on other plastics
of 120%.

Imposition of a ban on importation
of old computers, freezers and
refrigerators. A three month period
allowed to enable goods in transit
and in bonded warehouses to be

                                   Tanzania Budget Review: East African Highlights


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