Proposed Tanzanian Budget for 2017/18

  | 4 min read
Tanzanian Budget

7 Highlights of the Proposed Tanzanian Budget

To any Tanzanian, the 2017/18 budget estimates are a clear indicator of the government’s efforts in improving the economic sector and reducing poverty. With the new budget promising a GDP growth rate of 7.1% and limit the inflation rate to a single digit of around 5 % to 8%, opportunities for business owners are abundant. The Minister of Finance and Planning Dr. Phillip Mpango, during his budget speech, stated that the budget is meant to ensure industrialisation so as to create more job opportunities as well as the development of infrastructure and fighting tax evasion.

These are some of the key highlights of the proposed budget:

1. The agricultural sector

Tanzanian Budget Agriculture
Livestock keepers will be able to enjoy the exemption of VAT on locally produced animal feeds. This is in an effort to encourage livestock production and promote the production of fertilised eggs used for incubation. The ultimate intention is to reduce costs related to the incubation process and promote the growth of the poultry sub-sector. If you have been thinking of starting a poultry farming business, this is your chance to invest.

2. Protecting local industries

Tanzanian Budget Local Industry
The government intends to exempt VAT on capital goods used in the production of edible oil, textiles, leather, and pharmaceutical (including veterinary) products. This is in addition to reducing corporate tax from the current 30% to 10% for the first five years from the start of operations, for new assemblers of vehicles, tractors and fishing boats. The exemption created by the government in order to encourage investments in small and medium scale industries to go with the current government’s slogan of “Tanzania ya viwanda – Industrializing Tanzania. This means that we should see an increase in businesses that deal in fashion, drugs and fast moving consumer goods.

3. To diversify the tax base

Tanzanian Budget Mining
The proposed budget suggests that 5% of the final withholding tax should be charged, on the total market value of all the minerals that will be sold by small miners as defined under the Mining Act. The Mining Act requires that a dealer license may be issued with respect to gold, metallic minerals, coloured gemstones, diamonds, coal and industrial minerals. This will have an implication on the current price of jewellery and likely discourage small miners and small investors.

4. Re-introduction of the Zero rating of VAT on ancillary transport services

Tanzanian Budget Transport
Due to the loss of business traffic created by the 18% VAT that came into effect in July 2015, subjected ancillary transport service, the government now intends to zero-rate ancillary transport services. This will create higher volumes of traffic for logistic companies and the ancillary transport industry.

5. Increase of excise duty on beverages, cigarettes, lubricating oils/ greases, natural gas & imported furniture


Tanzanian Budget Smoking
In efforts to widen the tax base, the proposed budget will impose excise duty on the above products.This a deliberate action to adjust inflation.

6. Removal of the Annual Motor Vehicle License Fee and an increase of fuel levy.

Tanzanian Budget Fuel
Instead, the fee is to be paid through an increase in excise duty by shilling 40 per litre levied on petrol, diesel, and kerosene.The removal of the annual motor vehicle will offer much relief to motorists. The increase of petrol, diesel, and kerosene is to cover the revenue that will be lost from the annual motor vehicle license fee.

7. The introduction of property tax for unvalued properties.

Tanzanian Housing Budget
The government will continue to collect property tax for both valued and unvalued houses in all local government authorities. For houses that have not been valued, charges will be applied in reference to the house types. Normal houses will be charged a flat rate of TZS 10,000 while storey houses will be charged a flat rate of TZS 50,000.

Winners and Losers
The 2017/18 budget is meant to fund the second year of the Five Year Development Plan II focusing on key flagship projects including construction of a Standard Gauge Railway (SGR), upgrade Air Tanzania Company Limited (ATCL), and developing the Mchuchuma Coal Mining and Liganga Iron Ore Mining projects. The government aims to increase revenue collection methods by stressing on the effective use of electronic devices and systems used to collect revenue.The government will also ensure the informal sector is taxable as well as ensuring tax exemptions are not abused. The informal sector will also require formalisation so as to ensure that the tax base is wide enough. Properties will be mass valued to increase property taxes. Such improvements in infrastructure will generally improve Tanzania’s trade efforts, despite the seemingly increased tax charges.

How else do you think the new budget will affect the Tanzanian economy? Tell us in the comments.

Neema Ngelime
A Content Creator who paints with light.