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Tanzania Budget Analysis

Highlights of Tanzanian Budget 2017

Economic Review

1

TANZANIA ECONOMY

Real GDP is projected to grow by 7.1%

in 2017 (real growth of 7.0% in 2016);

Controlling inflation rate and

maintaining it at a single digit, between

5 and 8 %;

Increase of domestic revenue

collections (Central Government and

Local Government Authorities) to 16.5

percent of GDP;

Increase tax revenue collection to 14.2

percent of GDP;

Government spending projected at

24.9 percent of GDP;

Budget deficit including grants is

projected at 3.8 percent of GDP;

Tanzania to maintain adequate foreign

exchange reserves to cover a minimum

of four months of importation of goods

and services;

For 2016, growth of per capita income

to 2,131,299 shillings compared to

1,918,897 shillings in 2015, an increase

of 11.1 percent;

Per capita income averaged in USD

increased rather at slow pace from USD

967.5 in 2015 to USD 979.1 in 2016;

In 2016, the inflation rate averaged 5.2

percent compared to 5.6 percent in

2015; slightly increased to 6.4 percent

in April 2017;

In 2016, credit to the private sector

grew by 7.2 percent to 16,608.9 billion

shillings from 15,492.7 billion shillings

in 2015;

Interest rates for time deposits

declined from an average of 9.30

percent to an average of 8.78 percent.

In addition, interest rates for one-year

deposits declined from an average of

11.16 percent in 2015 to 11.03

percent in 2016.

Capital formation, at market prices, in

2016 increased by 3.4 percent to

25,558,140 million shillings from

24,717,206 million shillings recorded in

2015;

The value of exports increased from

USD 8,918.1 million in 2015 to USD

9,285.6 million in 2016, equivalent to

an increase of 4.1 percent;

The value of imports declined from

USD 12,528.2 million in 2015 to USD

10,772.3 million in 2016 equivalent to

a decrease of 14.0 percent;

In 2016, trade deficit of USD 1,489.5

million, it was yet an improvement as

compared to a deficit of USD 3,594.7

million in 2015, representation of 58.6

percent improvement;

Up to December 2016, foreign currency

reserves were USD 4,325.6 million

compared to USD 4,093.7 million

recorded in December 2015;

The human development index (HDI)

improved from 0.521 points in 2014 to

0.531 points in 2015;


Economic Review

2

Spending Plan for development activities:

Expected Sources Amount in

Billion Shs

Domestic Sources 8,702.70

Foreign Sources 3,117.81

Total 11,820.50

Tanzania economy has continued to register

high economic growth whereas Tanzania was

among the top five African Countries:

The ratio of liquid assets to demand

liabilities stood at 35.9 percent in

March 2017 compared to the minimum

legal requirement of 20 percent.

Customer deposits in commercial

banks increased by 0.3 percent from

shillings 18.84 trillion in March 2016 to

shillings 18.89 trillion shillings in March

2017.

The ratio of nonperforming loans to

gross loans (NPLs) increased from 8.3

percent in March 2016 to 10.9 percent

in March 2017.

The discount rate reduced from 16.0

percent as applied since November

2013 to 12.0 percent which became

effective on 6 March 2017.


REVIEW OF 2016/17 BUDGET IMPLEMENTATION

REVENUE (in Billion Shillings)

Particulars

July 2016 to

April 2017

Annual

Target

% of Annual

Target

Tax revenue 11,645 15,105 77.09%

Non tax 1,611 2,693 59.82%

LGAs own source 399 665 60.01%

Loans from domestic sources 4,716 5,374 87.74%

Disbursement of grants and external

concessional loans 2,340 3,601 64.99%

External Non-concessional Loans 2,101

TOTAL 20,711 29,539

EXPENDITURE (in Billion Shillings)

Particulars

July 2016 to

April 2017

Annual

Target

% of Annual

Target

Recurrent expenditure 15,481 17,719 87.37%

Development expenditure 4,556 11,821 38.54%

TOTAL 20,036 29,539

3


Tax Reforms

Proposals for Tax Reforms

Policy and Administrative measures

Direct exportation of minerals not

allowed from the mines to other

countries. A clearing house to be

established at the international

airports, mining and other

appropriate areas. A clearing fee of

1% of the value of minerals to be

imposed.

Amendments in The Value Added Tax Act,

CAP 148

VAT on ancillary transport services

in relation to goods in transit to be

zero rated.

VAT on capital goods exempted on

Machines and Plants used in Edible

oil, textile, leather and

pharmaceutical (including veterinary)

industries.

Locally produced compounded

animal feeds under HS Code 2309,

exempted from VAT.

Supply of Fertilized eggs for

incubation exempted from VAT.

Amendments in The Income Tax Act, CAP

332

Amendment First schedule is aligned

in line with Section 4 to read three

consecutive years in place of five

consecutive year, for Alternate

Minimum Tax.

Amendment of Third Schedule to

revise the ceiling on the value of non-

commercial motor vehicle for

claiming wear and tear from existing

Tzs 15 Million to Tzs 30 Million.

Corporate income tax for new

assemblers of vehicles, tractors, and

fishing boats shall be 10 percent

instead of 30 percent for first five

years from commencement of

operations.

Introduction of 5 percent final

withholding tax of the total market

value of minerals to all small miners. (

It appears that the proposal is to

apply 5 percent final withholding tax

on procurement of minerals from

small minors, though wording is not

clear).

4


Tax Reforms

Amendments in The Excise (Management and Tariff) Act, CAP 147

The excise duty rates on the following items have been revised by 5% as under:-

Item Existing Rate

(Shillings per litre)

Revised Rate

(Shillings per litre)

Soft Drinks 58 61

Imported Water including mineral

waters containing added sugar or other

matter or flavour

58 61

Locally produced water 58 58

Locally produced fruit juices 9.5 9

Imported fruit juices 210 221

Beers made from local unmalted cereals 429 450

Other beers 729 765

Non- alcoholic beers (including energy

drinks and non-alcoholic beverages) 534 561

Wine produced with domestic grapes

with contents exceeding 75 percent 202 200

Wine produced with more than 25

percent imported grapes 2,236 2,349

Imported spirits 3,315 3,481

Item Existing Rate

(Shillings thousand

cigarettes)

Revised Rate

(Shillings thousand

cigarettes)

Cigarettes without filter tip and

containing domestic tobacco more than

75 percent

11,854 12,447

Cigarettes with filter tip and containing

domestic tobacco more than 75 percent 28,024 29,425

Other cigarettes 50,700 53,235

Item Existing Rate

(Shillings per

kilogram)

Revised Rate

(Shillings per

kilogram)

Cut rag or cut filler 25,608 26,888

5


Tax Reforms

Increase in excise duty by 40 Shillings per Litre as follows:

Item Existing Rate

(shillings per litre)

Revised Rate

(shillings per litre)

Petrol 339 379

Diesel 215 255

Kerosene 425 465

Amendments in The Road Traffic Act, CAP 168

Annual Motor Vehicle Licence Fee abolished.

Motor Vehicle Licence fee on first registration to be revised as under:-

Category of Vehicle Existing Fee

(shillings)

Revised Fee

(shillings)

With Engine Capacity between 501cc and

1500 cc 150,000 200,000

With Engine Capacity between 1501cc and

2501 cc 200,000 250,000

With Engine Capacity above 2501 cc 250,000 300,000

Amendments in The Local Government Finance Act, CAP 290

Reduction in Produce Cess charged by Local Government Authorities as under:

From 5 percent to 3 percent for cash crops.

From 5 percent to 2 percent for food crops.

Produce Cess shall not be charged on transportation of crops of less than one ton from

one local government authority to another.

6


Tax Reforms

Amendments in The East African

Community Customs Management Act,

2004

The following amendments have been

proposed:

Duty remission on wheat grain

falling under HS Codes

1001.99.10 and 1001.99.90 and

apply duty rate of 10 percent

instead of 35 percent for one year.

Duty remission on Linear Alkyl

Benzen Sulphuric Acid (LABSA)


3402.11.00, 3402.12.00 and

3402.19.00 and apply duty rate of

0 percent instead of 10 percent

for one year.

Continue to grant duty remission

on CKD kits for motorcycles at a

duty rate of 10 percent instead of

25 percent for one year.

Extend stay of application of the

EAC CET rate in Crude Palm Oil

falling under HS Code 1511.10.00

and apply duty rate of 10 percent


Grant stay of application of the

EAC CET rate and instead apply a

duty rate of 25 percent or USD

250 per metric ton whichever is

higher on Flat Rolled Products of

iron or non alloy steel falling 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;

7212.60.00 for one year.

Continue stay of application of the

EAC CET rate and instead apply a

duty rate of 25 percent or USD


higher on Steel Rods and Bars and

Hot-rolled Angles, sections of iron

or non alloy steel 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, 7216.10.00,

7216.21.00, 7216.22.00 and


7


Tax Reforms

Grant duty remission on inputs


and apply duty rate of 0 percent

instead of 25 percent or USD 200

per metric ton whichever is higher

for manufacturers of leaf spring.

The measure takes into account

that during the year 2016/17 there

was manufacturers of leaf spring in

Tanzania who were adversely

affected by the introduction of

import duty of 25 percent or USD


higher on their raw materials.

Grant stay of application of EAC

CET rate and instead apply a duty

rate of 10 percent or USD 125 per

metric ton whichever is higher on

Flat-rolled products of iron or non-

alloy steel, with a width of 600

mm or more, cold rolled or cold

reduced falling under HS Code

7209.15.00, 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.

Continue to provide duty

remission at duty rate of 0 percent

on inputs for manufacturers of “air

filters” in the region. The measure

is aimed at supporting the local

manufacturers of the products in

the region and create

employment;


CET rate on Gypsum Powder


and apply a duty rate of 10

percent instead of 0 percent for

one year.

Grant stay of application on the

reduction of remission level on

sugar for industrial use under HS

Code 1701.99.10 and apply duty

rate of 10 percent. During the

financial year 2016/17, it was

agreed to reduce progressively the

import duty remission levels from

90 percent to 75 percent so that

the import duty rate moves from

10 percent to 25 percent for the

period of three years.


CET rates on Electronic Fiscal

Devices (EFDs) Machines falling

under HS Code 8470.50.90 and

apply duty rate of 0 percent


To extend the stay of application

of the EAC CET rate and apply a

duty rate of 25 percent instead of

10 percent on paper products


4804.11.00; 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;

8


Tax Reforms

4805.24.00; 4805.25.00;

4805.30.00; 4805.91.00; and


Grant duty remission of on inputs

for use in the assembly of

equipments specifically designed

for use by disabled persons at 0

percent.


CET rate on aluminium structures

of HS Codes 7610.90.00 and

instead apply duty rate of 25

percent instead of 0 percent for

one year.

To change a wording of tariff code

4911.99.20 to include

examination answer sheets so that

the import duty of 0 percent

applies for both examinations

question papers and examination

answer sheets; and

Grant duty remission on inputs for

use in the assembly and

construction of ships at 0 percent.

This measure is intended to

provide relief to the assemblers

and promote the fishing industry,

marine transport and job creation.

Amendment in Part B of the 5th

Schedule of EAC CMA 2004 by

deleting para 25 in order to

remove import duty exemption on

Compact Fluorescent Bulbs (CFL)

and Light Emitting Bulbs (LED).

These are finished products;

Amendment of Section 203 of the

EAC CMA by replacing the USD

10,000 fine with USD 20,000 or

50 percent of the dutiable value of

the goods, whichever is higher.

Currently the maximum fine

Customs can charge on such

offences was only USD 10,000.

Amendment of Section 218 of

EAC-CMA 2004 to give the powers

of the restoration of seized items

to Commissioner of Customs

instead of EAC Council of

Ministers;

Amendment of Para 30 of the 5th

Schedule to the EAC-CMA, 2004

to include distribution of Oil and

Gas. This measure is intended to

provide import duty exemption on

projects of Heated Crude Oil

Pipeline implemented by Partner

States Governments;

Amendment of Various Fees and Levies

imposed by Ministries, Regions and

Independent Departments

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).

9


Tax Reforms

To abolish standards inspection

fee on cash crops such as cotton,

tea, cashewnuts 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. The

Tanzania Revenue Authority will

start collecting levy on posters

intended for commercial purposes

by 1st of July, 2017;

To abolish permit fees issued by

Local Government Authorities on

various activities for example

permit fees charged on

slaughtering places (not including

slaughtering and meat inspecting

fees), permit fee on transportation

of livestock and on establishing

pharmacies;

To abolish fees imposed on

livestock when they are in the

market for auction; and

To increase the amount of fine

imposed on the people who fail to

comply with the Local

Government Finance Act from not

more than shillings 50,000 and 12

months sentence up to between

shillings 200,000 and shillings

1,000,000 or between 12 months

and 2 years sentence.

100


Particulars

TZS

Millions

TZS

Millions

Revenue

A. Domestic Revenue 19,289,695

(i) Tax Revenue 17,106,336

(ii) Non Tax Revenue 2,183,359

B. Local Government Revenue Collection 687,306

C. 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 loans and Concessional 7,763,882

(i) External Non Concessional Borrowings 1,594,985

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

(iii) Domestic Non Concessional Borrowings (Loans –

Rollover) 4,948,229

Total Revenue (A+B+C+D) 31,711,986

Expenditure

E Recurrent Expenditure

(i) National Debt Services 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

Total Recurrent Expenditure 19,712,394

F. Development Expenditure

(i) Domestic Financing

8,969,747

o/w LGAs Expenditure 412,384

(ii) Foreign Financing

3,029,845

Total Development Expenditure 11,999,592

Total Expenditure (E+F) 31,711,986

BUDGET DEFICIT 3.8 % of GDP

Source: Ministry of Finance and Planning

11


0

5,000,000

10,000,000

15,000,000

20,000,000

DomesticRevenue

LocalGovernment

RevenueCollection

ExternalLoans and

Grants

Domesticloans and

Concessional

19

,28

9,6

95

68

7,3

06

3,9

71

,10

3

7,7

63

,88

2

TOTAL REVENUE (in Million TZS)

19,712,394; 62%

11,999,592; 38%

TOTAL EXPENDITURE (in Million TZS)

Recurrent Expenditure Development Expenditure

12

Our Review highlights the main aspects of the Budget, read by the Cabinet Secretary on 8th June 2017. The information contained in this review has been compiled from the Budget speech read on 8th June 2017 and the economic review. While all reasonable attempts have been made to ensure that the information contained herein is accurate, Grant Thornton accepts no responsibility for any errors oromissions it contains whether caused by negligence or otherwise. The review contains generalinformation only and is neither intended to be a comprehensive publication nor provide specific advice

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