BUDGET ANALYSIS 2017/2018
 TAX VIEWPOINT
 PROPOSED TAX CHANGES
Value Added Tax (VAT):-
Bitter- Sweet for Capital goods industry

Importation and local purchase of machines and plants used in production of edible oil, textile, leather, veterinary and pharmaceutical are now VAT exempt.
Technically in regard to Taxation it will be relatively cheaper to import than to buy locally because local producers of plants and Machinery will have input VAT that will not be able to claim on exempt supplies, therefore they will be forced to shift their input VAT to the buyers of these Machines giving advantage to foreign producers.
In Taxation, the best way to meet Government Objective of providing relief of Taxes in purchase of Machines and Plants is to charge VAT at Zero rate (rather than VAT exemption) which will promote production of these machine locally by allowing producers to claim input VAT and boost employment and Industrialisation in the country.

Major Boost for Tanzania Ports and Logistic Industry

From July 2017 VAT on Ancillary transport services in relation to goods in transit when they are in the Tanzania will be charged at ZERO Rates, this is a major boost to clearing agents and Oil Marketing Companies. This will boost documentation work be done in the country and by Zero rating of VAT will allow Clearing Agents and Oil Marketing Companies to Claim input VAT making their service cheaper.
In July 2015 VAT on Ancillary transport services in relation to goods in transit was introduced, stakeholders were up-in-arms that this introduction would result in loss of employment in most logistic and Marketing companies, as an extra 18% VAT cost would result into foreign Customers to do all the logistics themselves.

VAT on locally produced compounded animal feeds and Fertilised eggs for incubation are now exempted; this is key boost to Livestock keepers in the country.

Income Tax changes
Megadeal for New assemblers of vehicles, tractors and fishing Boats.

New Assemblers will be charged a Reduced Corporate Income Tax of 10% instead of 30% for Five Years from commencement of operations. The Government will sign a Performance Agreement with the assemblers to reflect the responsibilities of both parties.
Alternative Minimum Tax Hullabaloo has been Resolved

For a number of Years there was chaos on Alternative Minimum Tax basis on which is which, because under charge section of the Income Tax Act the Basis for Perpetual unrelieved loss was three years while the Tax rate in the Fifth Schedule indicated the basis is five Years, this controversy has now been resolved by the Minister amending the Fifth Schedule to also indicate three years basis as it is in the charge Section of the Act.
Non-Commercial Vehicles

In Calculating depreciation in Taxation (depreciation allowance), the Value of a non commercial Vehicle was limited to TShs 15,000,000. if you bought a non-commercial vehicle for more than 15Million the excess of 15million was not recognised as a legitimate cost of the Vehicle,
From July 2017 The depreciation basis for Non-Commercial Vehicles has been increased to TShs 30,000,000 that is double the previous amount.
For Taxation purpose a Non-Commercial Vehicle are all road vehicles that are by specification design can not to carry a load of more than half a tonne (500kg) such as, Saloon Cars and SUVs or vehicles that by design cannot carry more than 13 passengers. Please Note That: All vehicles that are used in transportation business and vehicle rental business are considered to be commercial Vehicles

Small Miners hit hard

There is introduction of 5% Final withholding Tax of the total market value of minerals to all small miners. This is an Extra Burden to Small Miners.
EMPLOYEES TAKE HOME:

No changes on PAYE rates for the year starting July 2017 to June 2018
Changes in the Excise Duty
Annual Motor Vehicle Licence Fee has been Abolished

Annual Motor Vehicle Licence Fee has been abolished. This Measure will by and large reduce Motor Vehicle Owners annual logistic burden of going to TRA for renew of Motor Vehicle Licences and traffic police habitual checks on Motor Vehicle Licence and will address long outstanding complaint of imposing fee even if the vehicle is out of use. Annual Motor Vehicle Licence Fees will be paid only once during Motor Vehicle first registration.
The Government to compensate for loss of revenue by abolishing Annual Motor Vehicle Licence, has increase Current Excise Duty rates on Petrol, Diesel and Kerosene by TShs. 40 per litre.
Amnesty

The Government has decided to forgive all unpaid Motor Vehicle Licence Fees.
The Local Government Finance Act
Produce Cess

Produce Cess has been reduced from 5 percent to 3 percent for cash crops and from 5 percent to 2 percent for food crops. This standardization will help to curb market distortion because traders were favoring areas with lower cess.
Produce Cess should not be applied on the transportation of crops of less than one ton from one Local Government Authority to another. Skills Development Levy (SDL)
Skills Development Levy (SDL)

Skills Development Levy of 4.5% has been maintained
Some changes in the East African Community Customs Management Act, 2004

Common External Tariff (CET)
Grant duty remission on wheat grain apply duty rate of 10 percent instead of 35 percent for one year to boost supply of Wheat to meet demand.

Grant Duty Remission on LABSA at duty rate of 0 percent instead of 10 percent for one year. This is a major boost to soap industries.

Continue to grant duty remission on CKD kits for motorcycles at a duty rate of 10 percent instead of 25 percent for one year.

Grant duty remission of 0 percent to local manufacturers of motor vehicle “air filters”

Fees and levies to be abolished are as follows:
To abolish fees imposed on fertilizer (standards inspection, radiation inspection and weight and measures) by the Tanzania Bureau of Standards (TBS), Tanzania Atomic Energy Commission (TAEC) and Weight and Measures Authority (WMA). The measure intends to increase agricultural productivity;
To abolish standards inspection fee on cash crops such as cotton, tea, cashew-nuts and coffee imposed by the Tanzania Bureau of Standards (TBS).

To abolish Service Levy imposed on guest houses which are subject to Guest House Levy;

To abolish a Levy imposed on posters that direct people to the places where public services such as schools, and hospitals or dispensaries are available

To abolish fees imposed on livestock when they are in the market for auction;

Tanzania Revenue Authority will start collecting levy on posters intended for commercial purposes by 1st of July, 2017

Nota Bene:- these proposed tax changes when approved shall become effective on 1st July, 2017, unless stated otherwise.
This Brief Budget Analysis has been prepared by:
Innocent Wilfred Makundi- Consultant- Tax Services
(BAF, MBA-CM, CPA, Tax Consultant)
CONTACTS:
Mob: +255-713-670126.
Facebook: www.facebook.com/innocent wilfred
Email: Innocentmakundi@gmail.com

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