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SPEECH BY THE MINISTER FOR FINANCE

AND PLANNING, HON. DR. PHILIP I.

MPANGO (MP), PRESENTING TO THE

NATIONAL ASSEMBLY, THE ESTIMATES

OF GOVERNMENT REVENUE AND

EXPENDITURE FOR 2017/18

08 June, 2017 Dodoma

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I. INTRODUCTION

1. Honourable Speaker, I beg to move that thisesteemed House, now resolves to receive,debate and approve the Government’sRevenue and Expenditure Estimates for theyear 2017/18. This budget is presented inline with Article 137 of the Constitution ofthe United Republic of Tanzania of 1977,together with Section 26 of the Budget ActNumber 11 of 2015.

2. Honourable Speaker, together with thisspeech, I submit four volumes of budgetbooks that explain in detail the budgetestimates in each Vote. Volume I presentsthe Revenue Estimates; Volume II presentsRecurrent Expenditure Estimates forMinistries, Independent Departments andGovernment Agencies; Volume III presentsthe Recurrent Expenditure Estimates forRegional Secretariats and Local GovernmentAuthorities; and Volume IV presents theDevelopment Expenditure Estimates forthe Ministries, Independent Departments,Government Agencies, Regional Secretariatsand Local Government Authorities. Inaddition, the Finance Bill, 2017 and theAppropriation Bill, 2017 are part of thisbudget.

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3. Honourable Speaker,to thank the Almighty God for His continuousgrace, blessings and peace He is grantingto our Nation; and enabling me to standbefore this Esteemed House to present theGovernment Budget for the year 2017/18.

4. Honourable Speaker, in a very special way,I would like to thank His Excellency Dr. JohnPombe Joseph Magufuli, the President of theUnited Republic of Tanzania for his truston me to serve the country in a sensitiveMinistry which is the heart of the Nation. Inaddition, I extend my sincere gratitude for hisguidance and encouragement especially onvarious issues that needed great attention.His words which carried a lot of weightthat I was appointed to bear blames on hisbehalf and on behalf of poor Tanzanians,and that I should always believe in God for

my responsibilities. I also commend HisExcellency the President together withhis principal aides, Her Excellency SamiaSuluhu Hassan, the Vice President ofthe United Republic of Tanzania, RightHonourable Kassim Majaliwa Majaliwa, thePrime Minister of the United Republic ofTanzania and MP for Ruangwa Constituencyfor the great work they are undertaking for

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5. HonourableSpeaker,letmealsocongratulate

starting with yourself Hon. Speaker of theParliament of the UnitedRepublic of Tanzaniaand a Member of Parliament for KongwaConstituency, and Hon. Dr. Tulia Ackson(MP), the Deputy Speaker. I commend you foryour competence and wisdom in leading thisesteemed House. I would like to sincerelycongratulate Hon. Professor Ibrahim Juma,Acting Chief Justice for leading the Judiciaryin delivering justice.

6. Honourable Speaker, I would also like tocongratulate the defence and security chiefs,starting with General Venance Mabeyo, Chiefof Defence Forces; Simon Siro, InspectorGeneral of Police; Dr. Juma Alli Malewa,Commissioner General of Prisons Services;Dr. Anna Makakala, Commissioner Generalof Immigration; Dr. Modestus Kipilimba,Director of Intelligence and SecurityServices; Mr. Valentino Mlowola, DirectorGeneral of the Prevention and Combatingof Corruption Bureau; Mr. Rogers WilliamSiang’a, Commissioner General of DrugsControl and Enforcement Authority; andMr. Thobias Andengenye, CommissionerGeneral of Fire and Rescue Force; and all

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respective institutions for being strong andcapable of ensuring maintenance of peace,security and sustainability of political andeconomic freedom.

7. Honourable Speaker, I would also liketo congratulate the new Members ofParliament who joined this House in this

Dimani Constituency MP (CCM); Hon.Dr. Getrude Pangalile Rwakatare, SpecialSeats MP (CCM); and Hon. Dr. CatherineNyakao Ruge, Special Seats, (CHADEMA).Further, I congratulate other new membersof Parliament who were appointed by the

(MP); Hon. Anne Kilango Malecela (MP); Hon.Salma Rashidi Kikwete (MP); and Hon. Prof.Palamagamba John Aidan Mwaluko Kabudi(MP), the Minister for Constitution and Legal

the same vein, I would like to congratulateall representatives elected by this House torepresent our Country to the East African

Fancy Nkuhi, Hon. Happiness Legiko, Hon.Maryam Ussi Yahya, Hon. Dr. AbdallahMakame, Hon. Dr. Ngwaru Maghembe, Hon.Eng. Habibu Mnyaa, Hon. Alhaji AdamKimbisa, Hon. Pamela Massay and Hon.

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Josephine Lemoyani. I wish them all thebest and I urge them to remain strong insafeguarding the national strategic interestsduring the EALA sessions.

8. Honourable Speaker, I would like to take thisopportunity to express my deepest sympathyto this esteemed House, following the demise

Dimani Constituency MP (CCM); and Hon.Dr. Elly Marko Macha, former SpecialSeats MP (CHADEMA). In addition, we lostour retired Speaker the late Samuel JohnSitta, the legend of “speed and standards”.Further, I express my sincere sympathy toparents, relatives and friends for the suddenloss of 32 pupils, two teachers and a busdriver of Lucky Vincent Nursery and PrimarySchool, following the road accident in KaratuDistrict that occurred on 6th May, 2017.Furthermore, I extend my deepest sympathyto the relatives of eight police and othervictims of gangsters for the loss of their lives

different periods. May the Almighty God resttheir souls in eternal peace. Amen!

9. Honourable Speaker, I am indebted tothe Parliamentary Standing Committee

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for Budget under the leadership of Hon.Hawa Abdulrahman Ghasia, Member ofParliament for Mtwara Rural Constituencyand her deputy, Hon. Josephat SinkambaKandege, Member of Parliament for KalamboConstituency for reviewing and analysing thebudget proposals which I am presenting now,and providing advice and recommendationswhich improved the Government budget for2017/18. In addition, I would like to thankthe chairpersons of the Sectoral StandingCommittees and all Honourable Membersof Parliament for your invaluable commentsand recommendations you provided whenscrutinizing the sectoral budgets. I alsothank Hon. George Mcheche Masaju (MP),Attorney General for timely preparation of theFinance Bill for 2017 and the AppropriationBill for 2017.

10. Honourable Speaker, I wish to recognizethe support of Hon. Dr. Ashatu KachwambaKijaji, Member of Parliament for KondoaConstituency and the Deputy Minister forFinance and Planning in discharging theduties of my Ministry. In addition, I wouldlike to thank Mr. Doto Mgosha James, thePermanent Secretary Ministry of Financeand Planning and Paymaster General,for the supervision of the daily ministry’s

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operations and effective coordination ofthe preparations of this budget. This hasbeen achieved in collaboration with Deputy

Mwanyika; Ms. Amina Kh. Shaaban; and Dr.Khatibu Kazungu, which I also cherish.

11. Honourable Speaker, I continue to registermy appreciation to Prof. Benno Ndulu, theGovernor of the Bank of Tanzania, for hisdistinguishedleadershipofthiskeyinstitutionresponsible for ensuring the integrity of

a balanced and sustainable growth of thenational economy. Moreover, I would liketo recognize the good work done by themanagement of Tanzania Revenue Authority(TRA) under the leadership of CommissionerGeneral, Mr. Charles Kichere. Further, I

Treasury Registrar and Dr. Albina Chuwa,Director General of the National Bureau ofStatistics. Furthermore, I extend my sinceregratitude to the Acting Executive Secretaryof the Planning Commission; Heads ofinstitutions under the Ministry; Heads ofDepartments and Units, and all the staffof the Ministry and its institutions for theiractive participation during the preparationof this Budget.

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12. Honourable Speaker, the Budget hastaken on board the recommendations fromvarious stakeholders, including businesscommunity and Development Partners. Iwould like to extend my sincere gratitudeto them for their invaluable opinions andrecommendations during the preparationof this Budget. Last but not least, myappreciation to the Advisory Committeeon Revenue Measures and Members of theTask Force on Tax Reforms which constituterepresentative from the private sectorand experts from academic and researchinstitutions. Their analysis and commentscontributed immensely in devising newrevenue measures that I will present in thisbudget.

13. Honourable Speaker, this is the secondbudget submitted by the Fifth PhaseGovernment under the leadership of HisExcellency Dr. John Pombe Joseph Magufuli,the President of the United Republic ofTanzania. The Government presentsthis Budget with sincere intention of fasttrucking realization of the aspirations of theNational Development Vision 2025 throughimplementation of the CCM 2015-2020Election Manifesto; Five Year DevelopmentPlan 2016/17-2020/21; and Long Term

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Perspective Plan (LTPP); and the GlobalSustainable Development Goals (SDGs)2030.

14. Honourable Speaker, in his inauguralspeech of the 11th Parliament on 20th

November, 2015, His Excellency, Dr. JohnPombe Joseph Magufuli, the President ofthe United Republic of Tanzania, laid downthe economic priorities of his Governmentfocused on sustaining and strengtheningeconomicprinciplesbuiltbyhispredecessors.

i. To accelerate inclusive economic growthto reach middle income status;

ii. To increase revenue, curb leakagesof government resources, controlexpenditure and enforce publicprocurement legislations;

iii. To improve economic infrastructuresuch as roads, railways, air and marinetransport and energy to with theobjective of attracting investors fromwithin and outside the country;

iv. To ensure that minerals and our naturalresources are utilized effectively for the

v. To emphasize on industrial developmentbearing in mind that Private Sector

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plays a key role in building industrialeconomy. Furthermore, the targetedindustries are those which will createjobs, utilize domestically produced rawmaterials, and produce goods whichwill be consumed by the majority of thepeople in the country;

vi. To improve agricultural produce,

on value addition and modernizationthrough training, provision of inputs,and extension services;

vii. To emphasize on improving tourism,landuse and environmentmanagement;

viii. To improve the quality of education,health services, water and energy;

ix. To combat rampant corruption,embezzlement and drug abuse; and

x. To undertake major reforms ingovernment operations with a view tominimize bureaucracy.

Therefore, the national economic performancereview and evaluation of the government budgetimplementation for 2016/17 aim at providing a

His Excellency, Dr. John Pombe Joseph Magufuli.

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15. Honourable Speaker, in the speech Ipresented in the morning on the state of

four months of the year 2017, I made it clearthat, our economy has continued to registerhigh economic growth whereas Tanzania

According to the recent economic statistics

(7.9 percent); Tanzania (7.1 percent); Senegal(6.6 percent); Djibouti (6.5 percent); andEthiopia (6.5 percent). The Deputy ManagingDirector of the IMF, Mr. Tao Zhang also madehis evaluation when he visited Tanzania inMay, 2017, that Tanzania’s economy hasremained stable due to implementation ofpolicy reforms under the strong leadershipof His Excellency Dr. John Pombe JosephMagufuli, particularly in domestic resource

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16. Honourable Speaker, similar sentimentswere provided by the World Bank throughthe report on Tanzania Economic Updatereleased in April 2017. According to theReport, the national economy remainsstable based on various indicators such as

foreign reserves and the value of the shilling

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against USD; I beg to quote part of the report

“Tanzania’s economic performance continues torank among the highest in the region. The realGDP growth rate has consistently outpaced its

four months of imports. The shilling has also

17. Honourable Speaker, Notwithstandingthe aforementioned achievements, therehave been some issues that dominatedpublic debates regarding the stability of oureconomy, which I would like to elaborate. The

shutdown and diminishing private sector

Liquidity conditions in the Economy

18. Honourable Speaker, liquidity is theamount of money in the economy whichis quickly available for investment andspending. High liquidity is when money iseasy to get as opposed to tight liquidity when

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are various indicators of liquidity conditions,including money supply, credit to privatesector, capital levels (which include cash,credit and equity) and the ratio of liquidassets to demand liabilities.

19. Honourable Speaker, during the periodending March 2017, extended broad moneysupply (M3), which include coins andnotes outside the banking system, demand

residents’ foreign currency deposits inthe banking system, increased to shillings22.53 trillion from shillings 21.65 trillionwith compared to the corresponding periodin 2016, equivalent to an increase of 4.1percent. During the period, the bankingsector remained sound, safe and stable withlevels of capital and liquidity staying above

of liquid assets to demand liabilities stood at35.9 percent in March, 2017 compared to theminimum legal requirement of 20 percent.The ratio of core capital to total risk weightedassets and off-balance sheet exposure was19.0 percent, which is above the minimumlegal requirement of 10 percent. In addition,customer deposits in commercial banksincreased by 0.3 percent from shillings 18.84trillion in March, 2016 to shillings 18.89trillion shillings in March 2017.

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20. Honourable Speaker, the ratio of non-performing loans to gross loans (NPLs)increased from 8.3 percent in March 2016 to10.9 percent in March 2017 compared to theacceptable industrial average of 5 percent.Credit to private sector grew by 3.7 percentin the period ending March 2017 comparedto the growth of 23.6 percent recorded inthe same period in 2016. The decrease waspartly due to cautious measures taken bybanks in lending to private sector followingthe increase in non-performing loans.

21. Honourable Speaker, in order to increaseliquidity of the commercial banks, theGovernment through the Bank of Tanzaniareduced the discount rate, whereby bankswill be able to borrow at lower costs; the ratewas reduced from 16.0 percent as appliedsince November 2013 to 12.0 percent whichbecame effective on 6 March, 2017. Further,

Bank of Tanzania reduced the StatutoryMinimum Reserve Requirement (SMR) inApril 2017 from 10.0 percent to 8.0 percent. Itis expected that enhancement of commercialbanks’ liquidity will stimulate lending tothe private sector at comperatively lowcost. It is our hope that with this decision,the commercial banks will be able to raise

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rates, to private sector and general public atlarge.

22. Honourable Speaker, in 2016/17, threebanks were put under administration forvarious reasons. They are Twiga BancorpLimited; FBME Bank Limited; and MbingaCommunity Bank. The Government,through the Bank of Tanzania, took overthe administration of Twiga BancorpLimited (Twiga) with effect from 28th

It was observed that continuation of Twigaoperations would have been detrimental toits depositors and other creditors. However,

of the undercapitalised Twiga Bancorp, theGovernment allowed the Bank to resumesome of its operations. The Governmentis currently reviewing applications frompotential investors who are interested to buyshares and inject new capital in the bank.

23. Honourable Speaker; on 8th May 2017,the Government closed operations of FBMEBank Limited, revoked the banking license,placed it under liquidation; and appointed

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the Deposit Insurance Board (DIB) asa Liquidator. The decision was reachedafter US Court upheld “the US FinancialCrimes Enforcement Network” (FinCEN)

US Financial Markets; which in turn wouldhave jeopardized FBME domestic operations.I once again use this opportunity to warnall banks that will be involved in money

against the country’s rules. Stern measureswill be taken to revoke their business licensesand other legal actions in accordance withthe Banking and Financial Institutions Act,2006 and other applicable internationallaws.

24. Honourable Speaker, the Government,through the Bank of Tanzania revokedlicense of Mbinga Community Bank, witheffect from 12th May, 2017 and appointedthe Deposit Insurance Board (DIB) itsliquidator. The decision was taken upondetermination that Mbinga Community Bankwas undercapitalized as provided under theBanking and Financial Institutions Act,2006 and its regulations. This posed a risk

that continuation of operations would havebeen detrimental to its depositors and other

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creditors. The Bank of Tanzania assures thepublic that it will continue to protect interestsof depositors and maintain the stability ofthe banking sector.

25. Honourable Speaker,outreach has deepened further across thecountry and at relatively low rates as a resultof expanded network of banking and other

40 commercial banks, 3 development banks,

services that are provided through mobilebanking, Agents and mobile phones.Currently, it is estimated that more than17 million Tanzanians transact paymentsthrough mobile phones.

Business Shutdown

26. Honourable Speaker, another issue thathas been widely debated by the public and theMembers of this House is the concern of theincreasing frequency of businesses closure,notably at Kariakoo in Dar es salaam andother cities. According to the informationrevealed by TRA during the period from

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July 2016 to March 2017, a total of 7,277businesses were shutdown in differentregions in the country. Generally, this trendis discouraging since residents lose jobsand incomes and the Government loses taxrevenue, while the economy slows down. Itis important therefore that whenever there isrampant closure of businesses, appropriateaction should be taken to identify the type ofbusinesses affected, the underlying factorswith a view to take appropriate mitigatingmeasures.

27. Honourable Speaker, factors put forwardas contributing to business shutdowninclude, among others, stiff businesscompetition, weak business management,increasing business operating costsattributed to transportation, taxes andlevies; and non-compliance to businessrules and principles. However, it is worth-noting that, following public awarenesscampaigns on tax compliance conducted byTRA, business owners have become aware ofthe need to report to TRA as soon as theycease their business operations in order toavoid accumulation of tax liabilities.

28. HonourableSpeaker, itisworthnotingthat,business start-up and closure is a common

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phenomenon in business operations. Iwould like to inform your esteem House thatduring the period from July 2016 to March2017, TRA registered 224,738 businesses.

one sided. It is also important to note that thisphenomenon does not happen in Tanzaniaalone. Historically, this has been happeningin various countries in different formsand magnitudes. Many of us have learnedabout The Great Depression which occurredin Europe and America between 1929 –1939. Likewise, many businesses in Chinaencountered great shocks in 1980s whereassome of which could not survive while othersmanaged to grow. This is well explained inthe book by Tian Tao, et al, titled, Huawei:

.I would like to quote a citation in page XXIV

“From the 1980s

human history. Businesses at the time were like

crashed against barriers in the sea or got stranded

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29. Honourable Speaker, The Governmentthrough the Ministry of Industry Trade andInvestment in collaboration with my ministrywill continue to monitor closely businesstrends and will take appropriate measureswhen needed. The Government appealsto the business community in the country

adhering to the country’s laws, regulationsand procedures.

30. Honourable Speaker, there have beenassertions that business community have

leaders and steps taken by the governmentin streamlining business operations. I wouldlike to reassure the business communitythat the Fifth Phase Government stronglybelieves that the private sector is an engineof the economy and highly values thecontribution of the business communityin economic development and the nationwelfare in general. It is vivid that the greatportion of goods and services for domesticuse and exports which earn the country theforeign exchange are produced by the privatesector. Similarly, private sector is the main

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employer and source of government revenue.Therefore, private sector is a great partnerof the government in an effort of bringingnational development.

31. Honourable Speaker, in recognition ofgreat importance of the private sector andbusiness community, the governmenthas continued to improve business andinvestment environment by strengtheningmacroeconomic stability, minimizebureaucracy, timely decision making,promote peace and security and ensureavailability of improved infrastructure andservices including access to reliable powerand credit to private sector. Those are theareas that the Government focuses on andwill continue to get priority. In addition, theGovernment is still determined to continuedialogue with business community throughTanzania National Business Council (TNBC),Tanzania Private Sector Foundation (TPSF)and other fora.

32. Honourable Speaker, we have now startedto witness improved business environment

indicators. According to the World BankDoing Business report of 2017, Tanzania

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has done better in doing business by moving12 positions up from 144 in 2016 to 132in 2017. Moreover, according to the reportby Quantum Global Research Lab of UK onAfrica Investment Index 2016, Tanzania wasranked as the most attractive investmentdestination in East Africa and the 8th inAfrica up from 19th in 2015.

33. Honourable Speaker, the Government willsustain dialogue with business communityaimed at getting their proposals on policyreforms and consider their concerns foreconomic development. The Governmentaspiration is to ensure that businesses areconducted under predictable and conduciveenvironment conducive to economic growthand job creation; revenue generation for

services delivery. The Government, throughTRA, will continue to modernize tax systems,improve procedures and create an enablingbusiness environment to facilitate smoothoperations. TRA, in collaboration withother government entities, will continue toconduct public awareness programs on theimportance of formalization of their economicactivities. I would like to emphasize that,paying taxes is an obligation, which everyTanzanian should adhere to, for national

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development. Hence, the Government willprotect business community but will nottolerate looting of national resources and taxevasion.

34. Honourable Speaker, on the same vein, Iwould like to take this opportunity to remindTRA staff that, tax collection is guided by legaland regulatory framework. The use of threatsand harassments to tax payers, soliciting

are neither acceptable nor tolerable. The TRAstaff involved in such malpractices, whomI believe are few, should stop henceforth.

consequences in accordance with the publicservice legislations. I take this opportunityto appeal to the business community andloyal citizens to provide right informationregarding any misconduct by TRA staff toenable the Government to act accordingly.Likewise, I urge you to provide informationon businesses evading taxes so that sternmeasures can be taken against them.

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II. REVIEW OF 2016/17 BUDGETIMPLEMENTATION

Revenue

35. Honourable Speaker, total resourcesmobilized during the period between July2016 and April 2017 amounted to shillings20,710.5, billion, equivalent to 70.1 percentof annual target of shillings 29,539.6 billion.These were mobilized from the following

i. Taxrevenueamountedtoshillings11,644.6billion, equivalent to 77.1 percent of annualtarget of shillings 15,105.1 billion;

ii. Non tax amounted to shillings 1,611.0billion, equivalent to 59.8 percent of annualtarget of shillings 2,693.0 billion;

iii. LGAs own source was shillings 399.3billion, equivalent to 60.0 percent of theannual target of collecting shillings 665.4billion;

iv. Loans from domestic sources were shillings4,715.6 billion, equivalent to 87.7 percentof annual target of shillings 5,374.3 billion;and

v. Disbursement of grants and externalconcessional loans were shillings 2,340.1billion, equivalent to 65.0 percent of theannual DPs commitment of shillings3,600.8 billion for 2016/17 budget.

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36. Honourable Speaker, in 2016/17 budget,the Government planned to borrow shillings2,100.9 billion from non-concessional sources

be raised due to constraints in the international

USD 500 million is expected by June, 2017.

Curbing Revenue Leakages

37. Honourable Speaker, in 2016/17, theGovernment continued to pursue variousmeasures to contain revenue leakages. Inthis context, some Government entities arenow collecting revenue through electronicsystems. For instance, Local GovernmentAuthorities and the Police Force in Dar esSalaamregionareapplyingLocalGovernmentRevenue Collection System (LGRCS) and the

Moreover, the Government has developedthe Government e-Payment Gateway System(GePGs) to facilitate revenue collection.The System will enable the Governmentto capture actual revenue collected fromdifferent sources in real time and simplifypayment of tax, levies and various fees. Inaddition, on 1st June, 2017, President of theUnited Republic of Tanzania, His Excellency

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Dr. John Pombe Joseph Magufuli launcheda new Electronic Revenue Collection System(e-RCS). The system aim at capturingright information of tax payers and serviceproviders especially telecommunicationcompanies, banks and television.

Collection of Property Tax

38. Honourable Speaker, the Finance Act,2016 which was passed by your EsteemedHouse mandated TRA to collect propertytax for all Local Government Authoritieseffectively 2016/17 Financial year. Thedecision was based on TRA’s experience and

systems across the country which couldfacilitate revenue collection from that source.

39. Honourable Speaker, following theenactment of this law, the GovernmentNotice (GN) No. 276 was gazetted on30th September, 2016, directing TRA tostart collecting property tax in 30 LocalGovernment Authorities in TanzaniaMainland. Responsibility for collectingproperty tax for the rest of Local GovernmentAuthorities remained within the mandate ofthe respective Authorities. During the period

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under review, the Government through TRAdeveloped property tax collection proceduresand systems. The preparatory work includedthe preparation of regulations, puttingin place property tax collection system,establishment of a unit responsible forproperty tax collection, recruitment of staffand procurement of working tools.

40. Honourable Speaker, following completionof the preparatory arrangements, TRAcommenced property tax collection effective1st

Authorities. Up to May, 2017 TRA collected

shillings 15,134.2 million. The Governmentremains optimistic that TRA will performmuch better in collecting property tax in2017/18.Reformmeasurestocollectpropertytax will be presented before concluding myspeech. I urge all stakeholders, including

for development of our communities and thenation at large.

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Expenditure

41. Honourable Speaker, during the periodending April 2017, the Government releasedshillings 20,036.5 billion to Ministries,Independent Departments, RegionalSecretariats, and Local Government

billion was for recurrent expenditure,equivalent to 87.4 percent of the annualtarget and while shillings 4,555.5 billion wasfor development expenditure, equivalent to38.5 percent of the annual target of shillings11,820.5 billion. The amount released fordevelopment projects includes shillings3,647.7 billion local funds and shillings907.8 billion foreign funds. However, partof foreign funds earmarked for developmentwere not captured in expenditure mainly dueto time lag in accounting for actual valueof the funds directly disbursed to projectssince some of the DPs continue to operatethis item outside the Government exchequersystem.

42. Honourable Speaker, some of theareas accorded priority in the release ofdevelopment funds during the period under

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i. Construction and maintenance of regionaland district roads (under the Road Fund)shillings 675.9 billion;

ii. Roads construction projects includingpayment of contractors and consultantsshillings 540.3 billion;

iii. Power generation projects, improving

shillings 421.5 billion;

iv. Higher education students loans shillings393.2 billion;

v. Advance payment of shillings 300 billion

gauge railway line from Dar es Salaam –Morogoro (Km 205);

vi. Acquisition of two aircrafts and advancepayment for four other aircrafts amountingto shillings 234.9 billion;

vii. Improvement of water supply in rural andurban areas shillings 186.4 billion; and

viii. Improving health services delivery atall levels shillings 170.6 billion, whichincludes procurement of medicines,medical equipment and reagents shillings156.1 billion.

43. Honourable Speaker, funds releasedfor recurrent expenditure include shillings5,320.3 billion for wages and salaries,representing 80.6 percent of the annualestimate; shillings 7,775.5 billion for

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public debt, equivalent to 97.2 percent ofthe annual estimate; and shillings 2,385.1

76.5 percent of the estimate.

44. Honourable Speaker, with regards torelease of funds for other charges, areas that

i. Financing operations of defence andsecurity forces shillings 591.3 billion;

ii. Financing free basic education programmeshillings 203.0 billion;

iii. Facilitating national examinations shillings69.9 billion;

iv. National Assembly Fund shillings 69.1billion;

v. Facilitating operations of Tanzania’sembassies abroad shillings 68.7 billion;

vi. Internship allowance for medical studentsshilings15.3 billion;

vii. Subsidies for agricultural inputsshilings15.0 billion;

viii. Subsidies for political parties shillings 14.2billion; and

ix. Procurement of grains for national foodreserve shillings 13.0 billion.

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Expenditure Control Measures

45. Honourable speaker, in 2016/17, theGovernment expenditure policies were set toinstil discipline in public expenditure in linewith the BudgetAct, No. 11of2015, the PublicFinance Act, CAP 348, the Local AuthorityFinance Act, CAP 290, the ProcurementAct, CAP 410 of 2013 and their respectiveRegulations, and Government Circulars andDirectives. The aim is to control unnecessaryexpenditure, to plug loopholes and leakagesand allocate high proportion of resources topriority areas.

46. Honourable speaker, in 2016/17, theGovernmentcontinuedtocontrolexpenditurein various areas, including reducing foreigntravel by ensuring that permits are grantedonly to travels with national interest; effectivemanagement of utilities; and control of themotor vehicle operational costs. In addition,the usage of public conference facilities hashelped to control Government expenditureon meetings, seminars and workshops.

Arrears

47. Honourable Speaker, as of June, 2016,outstanding arrears raised by Ministries,

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Independent Departments, Agencies (MDAs)and Regional Secretariats (RSs) amountedto shillings 2,934.4 billion. Following the

was established that shillings 1,997.9 billion

genuine. Government paid shillings 796.5

of the paid arrears, shillings 632.1 billionwas paid to contractors and consultants;shillings 78.9 billion to suppliers of goods andservices including shillings 11.2 billion forMedical Stores Department (MSD); shillings67.6 billion for employees; and shillings 17.9billion to service providers.

48. Honourable Speaker, during the periodfrom July to December, 2016, the stock ofGovernment arrears increased by shillings899.55 billion reaching shillings 2,100.90

constructions activities; shillings 890.16billion in respect of suppliers of goodsand services; shillings 159.10 billion is forstaff claims; shillings 75.45 billion is foroutstanding utility bills; and shillings 65.89

suppliers’ outstanding amount, shillings145.89 billion is the MSD arrears in respect

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of purchased medicines, medical equipmentand reagents.

Public Debt

49. Honourable Speaker, the Governmentcontinued to manage the public debtin accordance to Government Loans,Guarantees, and Grants Act, Cap 134. Inorder to ensure proper management of thepublic debt, your Esteemed House passedthe amendment of the aforementioned Act inNovember 2016. The amendments, among

and public corporations upon applicationfor Government Guarantee in order to limitits issuance; imposition of condition toensures that borrowed funds by the Union

in Zanzibar are disbursed as planned;and inclusion of additional members fromZanzibar in the National Debt ManagementCommittee.

50. Honourable Speaker, the national debtstock as at end March 2017 was shillings50,806.5 billion, of which public debtamounted to shillings 42,883.6 billionand the private debt was shillings 7,922.9billion. Public debt increased by 9.2

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percent from shillings 39,274.6 billion inMarch, 2016 to shillings 42,883.6 billion inMarch 2017. The increase in public debt isattributed to disbursement of new borrowingand previously committed loans fromconcessional and non-concessional sources,increase in interest arrears from Non ParisClub bilateral creditors and depreciation ofthe shilling against the US dollar.

51. Honourable Speaker, the public debtcomprised domestic debt amounting toshillings 12,073.7 billion, equivalent to28.1 percent and the external debt shillings30,809.9 billion, equivalent to 71.9 percent.Externalpublicdebtconsistedof concessionalloans from multilaterals institutions whichaccounted for56.8percent,bilateral creditors16.3 percent and international commercialbanks 26.9 percent. The loans were used to

construction, railways, energy, transport,education and water.

Debt Sustainability Analysis

52. Honourable Speaker, the DebtSustainability Analysis (DSA) conducted inNovember, 2016 revealed that the public debtis sustainable in the short, medium and long

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present value of total public debt to GDP was34.2 percent compared to the threshold of 56percent; the present value of external debtto GDP was 19.9 percent compared to thethreshold of 40 percent; the present valueof external public debt to export was 97.7percent compared to the threshold of 150percent; and the present value of externalpublic debt to domestic revenue was 145.3percent compared to the threshold of 250percent. These indicators measure the creditworthiness of a country.

53. Honourable Speaker, in line with theDSA results on public debt which measuresa country’s ability to service its debt, theratio of debt service to domestic revenue hasreached 11.5 percent against the thresholdof 20 percent, and the debt service of externalpublic debt to export is 7.8 percent againstthe threshold of 20 percent. Based on theobserved indicators which are well below thethreshold, Tanzania still has a borrowingspace from external and internal sources

able to service the maturing obligationtimely through domestic revenue and exportearnings.

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III. FISCAL POLICIES FOR 2017/18

54. Honourable Speaker, the East AfricanCommunity Partner States agreed that,the 2017/18 budget theme should revolvearound ‘industrialization for job creationand shared prosperity’. This is consistentwith the industrialization agenda forTanzania under the Fifth Phase Governmentof His Excellency, Dr. John Pombe JosephMagufuli.

Macroeconomic Policy Targets

55. Honourable Speaker, implementation of2017/18 budget is aimed at achieving the

i. Attain real GDP growth of 7.1 percent in 2017up from the actual growth of 7.0 percent in2016;

ii.the range of 5.0 – 8.0 percent in 2017;

iii. Domestic revenue including LGA’s own sourcesis projected at 16.5 percent in 2017/18 upfrom the likely outturn of 15.8 percent in2016/17;

iv. Tax revenue is estimated at 14.2 percent ofGDP in 2017/18 up from the estimate of 13.3percent in 2016/7;

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v. Total expenditures are projected at 26.2 ofGDP percent in 2017/18 from the estimate of23.7 percent in 2016/17;

vi.GDP in 2017/18 from 4.5 percent in 2016/17;

vii.

viii.cover at least 4.0 months of projected importof goods and services (excluding FDI).

Revenue Policies

56. Honourable Speaker, the Governmentis committed to increase and strengthendomestic revenue collections by pursuing

i. Continue emphasizing effective use ofelectronic devices and systems in revenuecollection to contain revenue leakages;

ii. Continue to widen the tax base includingformalization of the informal sector tocapture it into the tax net;

iii. Improve collection and strengthenmanagement of non-tax revenue;

iv. Continue with mass valuation of propertiesto increase property tax revenue;

v. Formalizing land ownership with a view ofincreasing revenue; and

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vi. Continue with control measures tominimize abuse of tax exemptions.

57. Honourable Speaker, in 2017/18,the Government will continue to expand

number of participants in the market fromboth internal and external that will enablethe Government to raise resources to close

The Government will expedite negotiationprocess for external non-concessionalborrowing, while safeguarding the nationalinterests and ensuring that proceeds raisedare directed to development projects.

58. Honourable Speaker, the Government, incollaboration with Development Partners,engaged a team of independent consultantsin a bid to fostering development cooperationand ensuring that funds committed forvarious projects and programs are timelyreleased. The Team, led by Dr. Donald P.Kaberuka, the former President of the AfricanDevelopment Bank, was commissioned toassess and recommend on improvement

instruments.

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59. Honourable Speaker, the consultants’recommendations to strengthen development

i. Establishing effective dialogueis to hold annual review and strengthenPublic Expenditure Review (PER) process,optimizing impact of sector working groupsas well as addressing sensitive issueswithout affecting budget process;

ii. Building institutional capacity: The driveis to create a world-class skills across arange of areas such as negotiation skills for

sector management, trade policies, externaldebt management, and research and policyanalysis; and

iii. Financing Development Agenda: Themotive is to leverage resources from thePrivate Sector through Public PrivatePartnership (PPP) arrangement. Further,the General Budget Support (GBS) canstill be used in strategic areas such asclearance of Government’s arrears, whichare threatening the growth of our economy.

60. Honourable Speaker, the Governmentis currently incorporating the consultants’recommendations in the Development

40

Cooperation Framework (DCF). Theframework will address various issues,

cooperation; the dialogue structure; and

country’s requirements. The Government isoptimistic that, these measures will improvecooperation between the parties and enableDevelopment Partners to honour theircommitments by disbursing funds timely.

Expenditure Policies

61. Honourable Speaker, in 2017/18, theGovernment will continue to allocatefunds in priority areas to ensure effectiveimplementation of the Annual DevelopmentPlan (ADP). The Government will sustain

value for money. In implementing this

i. Ensure that all commercially viable Public

depending on Government subvention;

ii. Ensure that all contracts with GovernmentEntities (Ministries, IndependentDepartments and Agencies; RegionalSecretariats, Local Government Authoritiesand Public Entities) are expressed inTanzania shillings to minimize Government

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contracts involve foreign transactions;

iii. Continue to control cost arising frompublic utilities, coupled with the use ofcost saving technologies;

iv. Continue to ensure that salaries are paidto only eligible employees; and

v. Application of ICT to facilitatecommunications in the Governmentundertakings.

62. HonourableSpeaker,onthemovetocontrolaccumulation of arrears, the Government

i. No expenditure will be effected unless it isbudgeted for in the respective Vote;

ii. No goods and services for the Governmentshall be supplied without provision of

iii. Government commitments will strictlybe subjected to funds availability andawarding of contracts shall be supportedby warrants to spend; and

iv. Borrowing by any Government institutionsshall seek prior approval from the Ministerfor Finance and Planning as stipulated inthe Government Loans Guarantees andGrants Act, 1974 as amended.

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Priority Areas for 2017/18

63. Honourable Speaker, the 2017/18Annual Development Plan is part of theimplementation of the National Five YearDevelopment Plan 2016/17 – 2020/21. Asspelt out in my speech on the State of the

i. Interventions for fostering economic growth

and industrialization;

ii. Interventions for fostering human

development;

iii. Interventions to create a conducive

environment for enterprisesandbusinesses

to thrive; and

iv. Interventions tostrengthen implementation

effectiveness.

64. Honourable Speaker, the Plan emphasizessuccessful implementation of FlagshipProjectsnew standard gauge railway line; revampingthe national air carrier; mining of coal andiron ore and construction of iron and steelcomplex in Mchuchuma and Liganga –Njombe; establishment of Special Economic

43

Gas (LNG) Plant; establishment of KurasiniTrade and Logistics Centre; developmentof Mkulazi Agricultural Farm and SugarFactory; and mass training for developmentof specialized skills for industrialization andhuman development and fostering science,technology and innovations.

IV. REFORM OF THE TAX STRUCTURE,FEES, LEVIES AND OTHER REVENUEMEASURES

A. Policy and Administrative Measures

65. Honourable Speaker, the Governmentwill continue to undertake various policyand administrative measures in order tostrengthen and simplify revenue collection.

i. To strengthen revenue collectionsystems by applying electronic systemsso as to curb revenue leakages. The“Government Electronic PaymentGateway System” is already in placefor use by Ministries, GovernmentDepartments and Institutions. I amdirecting all the Ministries, GovernmentDepartments and Institutions to startusing the system.

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ii. The Government has launched a newsystem of revenue collection (ElectronicRevenue Collection System (e-RCS))which will ensure proper assessment oftaxes and provide assurance to the taxpayers on the amount of taxes they aresupposed to pay. The system will start

will be managed by Tanzania RevenueAuthority, Tanzania CommunicationRegulatory Authority and ZanzibarRevenue Board.

iii.Government will continue to collectProperty Tax (for valued and non-valued houses) in all local governmentauthorities. The collection of PropertyTax will be managed by the Ministry ofFinance and Planning through TanzaniaRevenueAuthority. TheGovernmentwillimpose Property Tax on all houses andthe property rate will be determined bythe Minister for Finance and Planning.For houses which have not been valued,

house will apply and the rate of shillings

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iv.businesses and those operating ininformal places for example foodvendors, small second hand clothessellers, small agricultural products(vegetables, banana and fruits) sellers,etc by issuing them identity cards.

v. To continue with enforcementmeasures and emphasis on the useof Electronic Fiscal Devices (EFDs) byMinistries, Government Departmentsand Institutions and to all businesses.

vi. The Government will open an EscrowAccount starting July, 2017 to ease therefund of additional import duty of 15

of sugar for industrial use and ensurethat the refund is paid on time.

vii. The Government will not allow directexportation of minerals from themines to other countries and insteadit will establish clearing houses at theinternational airports, mining areasand other appropriate areas where the

export permit before being exported. TheGovernment will impose a clearing feeof one percent of the value of minerals.

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B. Reform of the Tax Structure, Fees,Levies and Other Revenue Measures

66. Honourable Speaker, together with thepolicyandadministrativemeasures, Iproposeto make amendments to the tax structurethat will include amendments of tax rates,fees and levies imposed under various laws.These amendments are intended to increaseGovernment revenue, to promote economicgrowth particularly in the industrial,agricultural and transport sectors and alsoincrease employment opportunities. The

i. The Value Added Tax Act, CAP 148;

ii. The Income Tax Act, CAP. 332;

iii. The Excise (Management and Tariff)Act, CAP 147;

iv.

v. The Local Government Finance Act,CAP 290;

vi. The East African Community CustomsManagement Act, 2004;

vii. Minor amendments in tax laws andother laws; and

viii. Amendment of various fees and leviesimposed by Ministries, Regions andIndependent Departments.

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a) The Value Added Tax Act, CAP 148

67. Honourable Speaker, I propose to makeamendments in the Value Added Tax Act,

i. To exempt VAT on capital goods in orderto reduce procurement and importationcosts on machines and plants usedin production. The exemption willapply to edible oil, textile, leather andpharmaceutical (including veterinary)industries. The objective of this measureis to promote investments in small,medium and large scale industries byproviding relief of taxes in the purchase

machines and plants that are to be

under their respective HS Codes.

ii. To zero rate VAT on ancillary transportservices in relation to goods in transitwhen they are in the United Republic ofTanzania. The objective of this measureis to reduce the costs incurred bytransporters when using our ports andmake them affordable and competitive.This will make Tanzania a preferred

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route for landlocked countries’ importsand therefore increase employmentopportunities and Government revenue.

iii. To exempt VAT on locally producedcompounded animal feeds under HSCode 2309. The measure is intendedto reduce costs incurred by livestockkeepers in the procurement of suchfeeds and therefore contribute to thegrowth of the sub-sector.

iv.the exemption schedule to the VAT Actto include fertilized eggs for incubation.The measure is intended to provide taxexemption on fertilized eggs, reducecosts related to incubation and promotegrowth of the poultry sub-sector.

The VAT measures altogether are expectedto reduce Government revenue by shillings48,034.1 million.

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b) The Income Tax Act, CAP 332

68. Honourable Speaker, I propose to makeamendments in the Income Tax Act, CAP

i. To amend part four of the First Scheduleto the Income Tax Act, CAP 332 toalign the number of years providedfor under Section Four of the IncomeTax Act, 2004 with the provision of theFirst Schedule of the Income Tax Act,2004. The imposition section providefor three consecutive years for a personwith perpetual unrelieved loss to payAltenative Minimum Tax while the First

years. This measure is intended toensure consistency and clarity inapplication of the law.

ii. To amend the Third Schedule of theIncome Tax Act, CAP 332 to increase thequalifying amount of non-commercialmotor vehicles from shillings 15 millionto shillings 30 million. This measuretakes into account that the currentamount of shillings 15 million isoutdated when considering the marketvalue of such vehicles at the moment.

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iii. To amend the Income Tax Act, CAP332 in order to reduce the CorporateIncome Tax for new assemblers of

from 30 percent to 10 percent for the

operations. This measure is intendedto increase employment, Governmentrevenue and facilitate technologytransfer. Either, the Government willsign a Performance Agreement with the

of both parties.

iv.Withholding Tax) of 5 percent of the totalmarket value of minerals to all smallminers. The objective of this measureis to ensure optimal collection ofGovernment revenue from the mineralsector.

The Income Tax measures altogether are expectedto increase Government revenue by shillings88.5 million.

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c) The Excise (Management and Tariff) Act,CAP 147

69. Honourable Speaker, I propose to makeamendments in the Excise (Management

i.

products. The adjustment is done becausewhen the excise duty is imposed by using

and therefore erodes Government revenue.

duty rates in order to keep pace with

case where the Excise Duty is imposed byusing advalorem rates because the values

Excise Tax (Management and Tariff) Act,

duty rates may be annually adjusted in

rate and other key macroeconomicindicators. However, in order to supportthe National Strategy for building anindustrial economy, the Excise Duty forsome locally produced products will not be

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a. Excise Duty on soft drinks fromshillings 58 to shillings 61 per litrewhich is an increase of shillings 3per litre;

b. Excise Duty on imported waterincluing mineral waters containing

from shillings 58 to shillings 61 perlitre, which is an increase of shillings3 per litre. The Excise Duty on locallyproduced water remains at shillings58 per litre;

c. Excise Duty on locally produced fruitjuices from shillings 9.5 per litre toshillings 9.0 per litre;

d. Excise Duty on imported fruit juicesfrom shillings 210 to shillings 221per litre which is an increase ofshillings 11 per litre;

e. Excise Duty on beers made from localunmalted cereals from shillings 429to shillings 450 per litre which is anincrease of shillings 21 per litre;

f. Excise Duty on other beers fromshillings 729 to shillings 765 per litrewhich is an increase of shillings 36per litre;

g. Excise Duty on non-alcoholic beers(including energy drinks and non-alcoholic beverages), from shillings

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534 to shillings 561 per litre which isan increase of shillings 27 per litre;

h. Excise Duty on wine producedwith domestic grapes with contentexceeding 75 percent from shillings202 per litre to shillings 200 per litre;

i. Excise Duty on wine produced withmore than 25 percent importedgrapes from shillings 2,236 toshillings 2,349 per litre which is anincrease of shillings 113 per litre;

j. Excise Duty on imported spirits fromshillings 3,315 to shillings 3,481 perlitre which is an increase of shillings166 per litre. The Excise Duty onlocally produced spirits remains atshillings 3,315 per litre;

k. Excise Duty on cigarettes without

tobacco more than 75 percent, fromshillings 11,854 to shillings 12,447per thousand cigarettes, which isan increase of shillings 593 perthousand cigarettes;

l. Excise Duty on cigarettes with

tobacco more than 75 percent, fromshillings 28,024 to shillings 29,425per thousand cigarettes, which isan increase of shillings 1,401 per

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thousand cigarettes;

m.Excise Duty on other cigarettesnot mentioned in (k) and (l) fromshillings 50,700 to shillings 53,235per thousand cigarettes, which isan increase of shillings 2,535 perthousand cigarettes;

n.shillings 25,608 to shillings 26,888per kilogram which is an increase ofshillings 1,280 per kilogram;

o. Excise Duty on cigar remains at 30percent.

ii. To abolish Annual Motor Vehicle LicenceFee and increase Excise Duty on Petrol(Motor Spirit and Premium), Diesel (Gas

litre from shillings 339 to shillings 379per litre of petrol, from shillings 215 toshillings 255 per litre of Diesel and fromshillings 425 to shillings 465 per litre ofKerosene. The increase of Excise Duty onPetrol, Diesel and Kerosene is intended tocompensate the loss of revenue resultingfrom the abolition of Annual Motor VehicleLicence Fee which among others, it willaddress the complaint of imposing fee evenif the vehicle is out of use.

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The Excise Duty measures altogether areexpected to increase Government revenue byshillings 27,801.8 million.

d)

70. Honourable Speaker, I propose to amend

i. To abolish the Annual Motor VehicleLicence Fees so that the fee is paid only once

paid through Excise Duty to be imposed on

(IK) by increasing the Excise Duty onPetrol, Diesel and Kerosene by shillings 40

the Government will provide tax amnestyfor unpaid fees.

I also propose to increase the Motor Vehicle

a. Motor Vehicle with an enginecapacity between 501 cc and 1500cc from shillings 150,000 to shillings200,000, which is an increase ofshillings 50,000;

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b. Motor Vehicle with an enginecapacity between 1501c and 2500cc from shillings 200,000 to shillings250,000, which is an increase ofshillings 50,000;

c. Motor Vehicle with an engine capacityabove 2501 cc from shillings 250,000to shillings 300,000, which is anincrease of shillings 50,000;

The measures altogether are expected toincrease Government revenue by shillings77,603.5 million.

e) The Local Government Finance Act, CAP290

71. Honourable Speaker, I propose to amendthe Local Government Finance Act, CAP 290in order to reduce Produce Cess chargedby the Local Government Authorities from5 percent to 3 percent for cash crops andfrom 5 percent to 2 percent for food crops.Furthermore, Produce Cess should not beapplied on the transportation of crops of lessthan one ton from one Local GovernmentAuthority to another. The objective of thismeasure is to increase the income earnedby farmers when selling their crops andstimulate agricultural production.

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f) The East African Community CustomsManagement Act, 2004

72. Honourable Speaker, the Ministersresponsible for Finance from the EACPartner States held their meeting “Pre-Budget Consultations” in Arusha, Tanzaniaon 6th May, 2017. During the meeting, theyagreed to undertake the comprehensivereview of Common External Tariff as arequirement under the Custom UnionProtocol. Furthermore they agreed to effectchanges in the Common External Tariff(CET) and make amendments to the EastAfrican Community- Custom Management

year 2017/2018. The focus was mainly onindustrialisation for job creation and sharedprosperity.

73. Honourable Speaker, The changes inCommon External Tariff (CET) which were

i. Grant duty remission on wheat grainfalling under HS Code 1001.99.10 and1001.99.90 and apply duty rate of 10percent instead of 35 percent for oneyear. The measure takes into accountthat the region has no adequatecapacity to produce wheat and satisfythe demand;

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ii. Grant Duty Remission on LinearAlkyl Benzen Sulphuric Acid (LABSA)falling under HS Codes 3402.11.00;3402.12.00 and 3402.19.00 at dutyrate of 0 percent instead of 10 percentfor one year. The measure is intended topromote cottage industry particularlythe stand alone soap manufacturingindustries as this is an input for soapmanufacturers;

iii. Continue to grant duty remission onCKD kits for motorcycles at a duty rateof 10 percent instead of 25 percent forone year. This measure is taken in orderto continue promoting local motorcycleassembling in the EAC region whileawaiting a team of experts in theregion to develop a list of exclusion andinclusion on CKD motorcycle assemblyunder duty remission and develop theregulation so that the assembly includeslocally manufactured inputs;

iv. To extend stay of application of the

falling under HS Code 1511.10.00and apply 10 percent instead of 0percent for one year. This measure isintended to continue supporting the

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production of oils seeds and growthof edible oil industries. In order toensure successful implementation ofindustrial development strategy, weneed to promote oil seeds and edible oilproduction in the country;

v. Grant stay of application of EAC CETrate and instead apply a duty rateof 25 percent or USD 250 per metricton whichever is higher on Flat-rolledproducts of iron or non-alloy steelfalling under HS Codes 7210.41.00;7210.49.00; 7210.61.00; 7210.69.00;7210.70.00; 7210.90.00; 7212.30.00;7212.40.00; 7212.50.00; 7212.60.00for one year. The anti-dumping measureon imports of this nature is aimed atprotecting the domestic industriesagainst cheap products from outsidethe region;

vi. Continue stay of application of EACCET rate and instead apply a duty rateof 25 percent or USD 200 per metric tonwhichever is higher on Steel Rods andBars and Hot-rolled Angles, Sections,falling under HS Codes 7213.10.00,7213.20.00, 7214.10.00, 7214.20.00,7214.30.00; 7214.91.00, 7214.99.00,

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7216.10.00, 7216.21.00, 7216.22.00and 7216.50.00 for one year. This isalso aimed at protecting the domesticindustries against cheap productsfrom outside the region. Furthermoreit promotes further investment andincrease employment;

vii. Grant duty remission on inputs fallingunder HS Code 7228.20.00 and applyduty rate of 0 percent instead of 25percent or USD 200 per metric tonwhichever is higher for manufacturersof leaf spring. The measure takes intoaccount that during the year 2016/17there was manufacturers of leaf springin Tanzania who were adverselyaffected by the introduction of importduty of 25 percent or USD 200 permetric ton whichever is higher on theirraw materials. The duty remissionmeasure is therefore intended to protectdomestic production of iron and steelproducts against unfair competitionfrom imported products while at thesame time these are raw materials tomanufacturers of leaf spring;

viii. Grant stay of application of EAC CETrate and instead apply a duty rate of

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10 percent or USD 125 per metricton whichever is higher on Flat-rolledproducts of iron or non-alloy steel, witha width of 600 mm or more, cold rolledor cold reduced falling under HS Code7209.15.00, 7209.16.00, 7209.17.00,7209.18.00, 7209.25.00, 7209.26.00,7209.27.00, 7209.28.00, 7209.90.00,for one year. This measure is aimedat protecting domestic industries from

the EAC region;

ix. Continue to provide duty remissionat duty rate of 0 percent on inputs

the region. The measure is aimed atsupporting the local manufacturers ofthe products in the region and createemployment;

x. Grant stay of application of EAC CETrate on Gypsum Powder falling underHS Code 2520.20.00 and apply a dutyrate of 10 percent instead of 0 percentfor one year. This measure is intendedto protect the local producers andpromote production of gypsum powderby using locally available raw materials;

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xi. Grant stay of application on thereduction of remission level on sugarfor industrial use under HS Code1701.99.10 and apply duty rate of

2016/17, it was agreed to reduceprogressively the import duty remissionlevels from 90 percent to 75 percentso that the import duty rate movesfrom 10 percent to 25 percent for theperiod of three years. However, the EACPartner States did not implement thismeasure. This has taken into accountthat sugar is a key raw material in thefoods, beverages and pharmaceuticalsectors which are critical sectors forhuman needs;

xii. Grant stay of application of EAC CETrates on Electronic Fiscal Devices(EFDs) Machines falling under HSCode 8470.50.90 and apply duty rateof 0 percent instead of 10 percent forone year. This is to encourage the useof electronic devices for accounting of

in areas of sales analysis and stockcontrol system;

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xiii. To extend the stay of application of theEAC CET rate and apply a duty rateof 25 percent instead of 10 percent onpaper products falling under HS Codes4804.11.00; 804.19.90; 4804.21.00;4804.29.00; 4804.31.00; 4804.39.00;4804.41.00; 4804.51.00; 4804.59.00;4805.11.00; 4805.12.00; 4805.19.00;4805.24.00; 4805.25.00; 4805.30.00;4805.91.00; and 4805.92.00 for oneyear. This measure is intended to protectthe local producers of these productsand promote production of papers inthe region;

xiv. Grant duty remission of on inputs foruse in the assembly of equipments

persons at 0 percent. This measure isintended to promote manufacturingof these essential equipments withinthe region and therefore increaseemployment;

xv. Grant stay of application of EAC CETrate on aluminium structures of HSCodes 7610.90.00 and instead applyduty rate of 25 percent instead of 0percent for one year. This measure isintended to harmonise duty rates of

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similar articles of base metal i.e. Steeland aluminium;

xvi. To change a wording of tariff code4911.99.20 to include examinationanswer sheets so that the import duty of0 percent applies for both examinationsquestion papers and examinationanswer sheets; and

xvii. Grantdutyremissiononinputs foruse inthe assembly and construction of shipsat 0 percent. This measure is intendedto provide relief to the assemblers and

transport and job creation.

74. Honourable Speaker, The Ministersresponsible for Finance also agreed tomake amendments in the EAC-Customs

i. To amend Part B of the 5th Schedule ofEAC CMA 2004 by deleting para 25 inorder to remove import duty exemptionon Compact Fluorescent Bulbs (CFL)and Light Emitting Bulbs (LED). These

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ii. To amend Section 203 of the EAC CMA

with USD 20,000 or 50 percent of thedutiable value of the goods, whicheveris higher. The intension is to put adeterrent measure on offences (suchas false documents, false declarations,fraudulent evasion of payment of taxes,

Customs can charge on such offences isonly USD 10,000 which is not punitiveenough to deter offenders;

iii. To amendSection 218 of EAC-CMA 2004to give the powers of the restorationof seized items to Commissioner ofCustoms instead of EAC Council ofMinisters;

iv. To amend Para 30 of the 5th Scheduleto the EAC-CMA, 2004 to include

measure is intended to provide importduty exemption on projects of Heated

Partner States Governments;

The Import Duty Measures altogether areexpected to increase Government revenue byshillings 16,053.9 million.

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g) Minor Amendments in Tax Laws andOther Laws

75. Honourable Speaker, I propose to makeminor amendments to various Tax Laws andother Laws so as to ensure their smoothand effective implementation. The proposedamendments will be made through theFinance Bill 2017 and Government Notices.

h) Amendment of Various Fees and Leviesimposed by Ministries, Regions andIndependent Departments

76. Honourable Speaker, I propose to amendvarious rates of fees and levies chargedby Ministries, Regions and IndependentDepartments in order to rationalize withthe current level of economic growth. I alsopropose to abolish some fees and levieswhich are considered to be underminingthe Government efforts to improve businessenvironment and reduce poverty. The

the Finance Act, 2017 and others throughthe Government Notices. The proposed

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i. To abolish fees imposed on fertilizer(standards inspection, radiationinspection and weight and measures) bytheTanzaniaBureauofStandards(TBS),Tanzania Atomic Energy Commission(TAEC) and Weight and MeasuresAuthority (WMA). The measure intendsto increase agricultural productivity;

ii. To abolish standards inspection feeon cash crops such as cotton, tea,cashewnuts and coffee imposed by theTanzania Bureau of Standards (TBS).The objective of this measure is toreduce production costs for industriesprocessing these crops and also toincrease farmers’ income;

iii. To abolish Service Levy imposed onguest houses which are subject toGuest House Levy;

iv. To abolish a Levy imposed on postersthat direct people to the places wherepublic services such as schools, andhospitals or dispensaries are available.Either, the Tanzania Revenue Authoritywill start collecting levy on postersintended for commercial purposes by1st of July, 2017;

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v. To abolish permit fees issued by LocalGovernment Authorities on variousactivitiesforexamplepermitfeeschargedon slaughtering places (not includingslaughtering and meat inspecting fees),permit fee on transportation of livestockand on establishing pharmacies;

vi. To abolish fees imposed on livestockwhen they are in the market for auction;and

vii.on the people who fail to comply withthe Local Government Finance Actfrom not more than shillings 50,000and 12 months sentence up to betweenshillings 200,000 and shillings1,000,000 or between 12 months and 2years sentence.

77. Honourable Speaker, the Government willcontinue with its efforts to review the feesand levies imposed by various institutions,agencies and regulatory authorities in orderto create better business environment,attract more investments and provide relief tovarious economic activities. This will involvereviewing the amounts of imposed fees andlevies and also abolishing the nuisance ones.

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i) Effective Date for Implementation ofNew Revenue Measures

78. Honourable Speaker, unless otherwisestated, the new measures shall becomeeffective on 1st of July, 2017.

V. BUDGET STRUCTURE FOR 2017/18

79. Honourable Speaker, consistent with

policy objectives, the Government plans tomobilize and spend shillings 31,712.0 billion.Domestic revenue, including LGAs ownsources, is estimated at shillings 19,977.0billion, which is 63 percent of the total

revenue is estimated to be shillings 17,106.3billion or 85.6 percent of domestic revenue;non-tax revenue is shillings 2,183.4 billion;and revenue from LGAs own sources isshillings 687.3 billion.

80. Honourable Speaker, DevelopmentPartners are expected to contribute shillings3,971.1 billion, which is 12.5 percent ofthe total budget in the form of grants andconcessional loans. The amount is comprisedof shillings 2,473.8 billion for development

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projects, shillings 556.1 billion for sectorbasket funds and shillings 941.2 billion forGeneral Budget Support.

81. Honourable Speaker, the Governmentintends to borrow shillings 7,763.9billion from domestic and external non-concessional sources. Domestic borrowingis estimated at shillings 6,168.9 billion,comprised of shillings 4,948.2 billion forrollover of maturing government securitiesand shillings 1,220.7 billion equivalentto one percent of GDP is new loans for

to speed up development of infrastructure,the Government expects to borrow shillings1,595.0 billion from external sources.

82. Honourable Speaker, in the year 2017/18the Government will increase efforts inresource mobilisation from domesticand external sources for implementationof development projects. However,implementation of huge projects, includingthe construction of the subsequent phases ofthe standard gauge railway and improvementof various ports in the country, will dependon resources availability after mid-yearreview. In addition, the process of issuing

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non-cash bond to social security funds willproceed immediately after the approval of

arrears owed to Government.

83. Honourable Speaker, in 2017/18, theGovernment plans to spend shillings

19,712.4 billion is for recurrent expenditure,including shillings 7,205.8 billion forwages and salaries, and shillings 9,461.4billion for public debt and general services.Development expenditure is estimated atshillings 11,999.6 billion equivalent to 38percent of the total budget, whereby shillings8,969.7 billion is local funds and shillings3,029.8 billion is foreign funds. The currentlevel of 38 percent is within the range of 30 to40 percent of the total budget as stipulatedin the Five Year Development Plan 2016/17– 2020/21.

84. Honourable Speaker, consistent withthe budget frame I have just explained, thebudget structure for 2017/18 is as shown inTable A.

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Table A: Budget Frame for 2017/18

Shillings Million

Revenue 2017/18

A. Government Domestic Revenue 19,289,695(i)Tax Revenue (TRA) 17,106,336

(ii) Non Tax Revenue 2,183,359

B. LGAs own source 687,306C. External Concessional Loans and Grants 3,971,103

(i) General Budget support 941,258

(ii)Projects Loans and Grants 2,473,770

(iii)Basket Loans and Grants 556,075

D. Domestic & External Non Concessinal Borrowing 7,763,882(i)External Non Concessional Borrowing 1,594,985

(ii)Domestic Non Concessional Borrowing (1.0 of GDP ) 1,220,668

(iii) Domestic Non Concessional Borrowing (Rollover) 4,948,229

TOTAL REVENUE (A+B+C+D) 31,711,986

Expenditure

E. Recurrent Expenditure 19,712,394

o/w (i) National Debt Service 9,461,433-Domestic Interest 1,025,546

-Domestic Amortization (Rollover) 4,948,229

- External Amortization 1,182,651

- External Interest 673,492

- Government Contribution to Pension Funds 1,195,882

-Other Expenditure under CFS 435,633

(ii) Wages and Salaries 7,205,768

(iii)Other Charges 3,045,193

- Protected expenditure 1,985,245

- LGAs expenditure 274,922

- MDAs operational costs 785,025

F. Development Expenditure 11,999,592(i) Domestic Financing 8,969,747

o/w LGAs Expenditure 412,384

(ii)Foreign Financing 3,029,845

TOTAL EXPENDITURE (E+F) 31,711,986BUDGET DEFICIT AS PERCENTAGE OF GDP 3.8%

Source: Ministry of Finance and Planning

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VI. CONCLUSION

85. Honourable Speaker, the proposedmeasures in this budget aim at buildinga strong economic base for the industrialeconomy and widening employment

attain a middle income economy by 2025.In order to attain this, every one of us hasto fully participate in legitimate productive

increase productivity.

86. Honourable Speaker, the success of thisbudget anchored on high level management

expenditure. Achievement of this objectiverequires joint and concerted efforts betweenthe Government and other stakeholders,including sustained sensitization of theprivate sector to invest in the priority areas.

responsibilities in order to ensure that thisbudget is successfully implemented.

87. Honourable Speaker, one of the basicprerequisites for our country to realize arapid economic and social transformation,

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among others, is to have competent andskilful leaders who can bring about andmanage such transformation. Such leaders

i. Endeavor for morality in actions that cangive beauty and dignity to life notablyto the less privileged community, and

service;

ii.the optimal desired future state of whatthe country wants to achieve over timeand set high targets;

iii. Capability of generating results-basedindicators for each program and projectthat will be implemented;

iv. Rock-solid supervision of implementationof programs and projects;

v.giving concrete directives and bearingin mind their consequences, and theattribute to match such capability withdevelopment and implementation ofleadership succession plans; and

vi. Cautious in appointing leadership teamsto support executive transition, and be

and effectively.

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88. Honourable Speaker, I am certain, andyour esteemed House and the majority ofTanzanians will agree with me that HisExcellency, Dr. JohnPombeJosephMagufuli,the President of the United Republic ofTanzaniahasall theattributesoutlinedabove.His Excellency is a patriotic leader and proudof his country. His vision is to transformTanzania with resolute determination andstrength of character with passionate toserve all Tanzanians particularly the under-privileged. His personal stance is unwaveringand has a spot-on passion to dedicatedlymanage performance. His Excellency hatescorruption, embezzlement of public fundsand misappropriation of natural resources.His Excellency is innovative as opposed to‘doing business as usual’ particularly foroutcomes decisive to the welfare of the Nation,even if such outcomes are not welcome tosome segments in the society.

89. Honourable Speaker, at present,Tanzanians have started to witness theaccomplishments registered in a relativelyshort interval of his leadership. In the18-month period, His Excellency, thePresident has perfected his endeavoursimmensely. This in turn has rekindled hopesand revitalized optimism to the majority, but

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also brought about resentment to few peoplebecause of his no-nonsense style which I

who could not match his resolve and speed;capture of cargo containers which werecleared at the Dar es salaam Port withoutpayment of applicable taxes; sacking civil

students lacking minimum eligible criteria for

management; control of the civil servicepayroll and fake invoices to the Government;restoration of discipline in the ministries,departments, agencies and institutions; hasinvested in education by providing free basiceducation; increase revenue collections froman average of shillings 800 billion per monthto an average of shillings 1.2 trillion; daredto implement long-term decisions by thegovernment to transfer its headquarters toDodoma; compels every Tanzanian to workhard; construction of a Standard GaugeRailway (SGR); bought two new aircraftsand made an advance payments for fouraircrafts in order to revamp the Air TanzaniaCompany Ltd and boost tourism; persuadedthe Government of Uganda to agree on theconstruction of the major oil pipeline projectfrom Hoima Uganda to Tanga Tanzania in a

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with the construction and rehabilitationof roads across the country, including the

and construction of power and waterinfrastructure projects and two new shipson Lake Nyasa. In addition, under hisleadership, the agenda of building industrialeconomy has gained great response from theprivate sector in the country, particularly inthe coastal zone.

90. Honourable Speaker, I am pleasedto inform my fellow Tanzanians that theaforementioned actions are critical andsensible investment. The 2017/18 Budgetwill continue to sustain these achievementsand take more prudent measures to forgeforward. There is a Swahili saying “Ukiona

implying nothingcomes out of nothing. My plea to all fellowTanzanians, particularly, we the leadersand citizens in general is that, we must

join hands with our President to workhard focusing on the vision and goals ofthe Fifth Phase Government of buildinga strong economy that can create jobs,new opportunities and fair and equitabledistribution of national resources to allcitizens. Let us safeguard our unity and

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peace, focusing on issues of national interest.

to thank and congratulate all citizens whopaid appropriate taxes that have enabledthe achievements registered todate. The

the resources realised from your taxes tobring the envisaged development. I reiteratethe earlier caution that, the government willnot hesitate to take legal action against anytax evaders.

91. Honourable Speaker, as I approach theend of my speech, I would like to recognizethe presence of our Development Partners(DPs) who are with us here today andthank them for their pledges amountingto shillings 3,971.1 billion to support the

(amount pledge/committed to 2017/18budget in the brackets) African DevelopmentBank (shillings 410.9 billion); Abu Dhabi

AFD/France ( shillings 27.3 billion); ArabBank for Economic Development in AfricaBADEA (shillings 10 billion); Belgium(shillings 13.7 billion); Denmark (shillings47 billion) United Kingdom through DFID(shillings 364.4 billion); European Union(shillings 150.3 billion); Finland (shillings

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25.7 billion); Germany (shillings 58.4billion); The Global Fund ( shillings 431.2billion) IFAD (shillings 45.3 billion); India(shillings 80 billion); Ireland (shillings 18.3billion) JICA/Japan (shillings 57.4 billion);Kuwait Fund (shillings 20 billion); Norway

8.5 billion); Poland (shillings 61.1 billion);Sweden (shillings 172.5 billion); SouthKorea (shillings 20 billion); Switzerland(shillings 12.1 billion; UNICEF (shillings3.4 billion); and The World Bank (shillings1,862.3 billion). The amount that have beenincluded in this budget have consideredhistorical background of commitments andpredictability of disbursements from our

and programmes.

92. Honourable Speaker, I would also liketo recognize the existing good relationshipbetween the Government of the UnitedRepublic of Tanzania and the IMF throughthe Policy Support Instrument (PSI). It is oursincere hope that the Board of Governors ofthe Fund will endorse another policy supportinstrument after December 2017.

It is my plea to the DPs that you continue tosupport the Fifth Phase Government of HisExcellency, Dr. John Pombe Joseph Magufuli,notably in the endeavour to build industrial

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economy. Tanzanians have heard the amount offunds you have pledged, I humbly request you tohonour your commitments; and we reassure youthat the funds that will be disbursed providedwill be used effectively and in a transparentmanner.

93. Honourable Speakerto conclude my speech by registering myappreciation in a special manner to my lovelywife and best friend, Mama MbonimpayeMpango, together with all our children andgrandchildren, for the daily care and prayersto the Almighty God that enabled me todischarge my duties and responsibilitiesto serve Tanzanians. Furthermore, I wouldlike to express gratitude to my relatives ofBuhigwe District and people of Kigomaregion in general, for their invaluable love

responsibilities. You groomed and taughtme to work hard. Personally, I sincerelypromise to continue be faithful and willnot disappoint you. Thank you very muchHonourable Members of Parliament, leadersand all Tanzanians for your kind attention.

MAY GOD BLESS TANZANIA!

94. Honourable Speaker, I beg to move.

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82

83

84

85

86

87

88

Mkopo ya ndani( IkijumuishaRollover)

19%

Misaada na Mikopo nafuuya Kibajeti

3%

Misaada na Mikopo nafuuya miradi ya maendeleo

10%

Mikopo ya nje ya kibiashara5%

Mapato ya ndani (kodi nayasiyo ya kodi )

61%

Mapato ya Halmashauri2%

Figure 3a: Source of Funds in 2017/18 BudgetTotal Resource Tshs 31,711,986 million

Mkopo ya ndani(

Ikijumuisha Rollover)

18%

General Budget

Support

7%

Misaada na Mikopo

nafuu ya miradi ya

maendeleo11%

Mikopo ya nje ya

kibiashara

7%

Mapato ya ndani

(kodi na yasiyo ya kodi

)60%

Mapato ya

Halmashauri

2%

Figure 3b: Source of Funds in 2016/17 BudgetTotal Resource Tshs 29,539,603 million

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DevelopmentExpenditure

(Foreign)

10%

Development

Expenditure (Local)

28%

Wages and Salaries

23%Other Charges

10%

CFS Others

5%

Rollover

19%

Interest Payment

(Domestic &

Foreign)

5%

Figure 4a: Government Expenditure, 2017/18(Total Expenditure Tshs. 31,711,986 million)

DevelopmentExpenditure

(Foreign)

11%

Development

Expenditure (Local)

29%Wages and Salaries22%

Other Charges11%

CFS Others5%

Interest Payments

(Domestic &Foreign)

Interest Payment(Domestic &

Foreign)

6%

Figure 4b: Governement Expenditure 2016/17(Tshs 29,539,603 million)