TANZANIA BUDGET HIGHLIGHTS 2020 - 2021

 economic performance in 2019 and beyond

GLOBAL ECONOMIC HIGHLIGHTS

• Global economic growth declined to 2.9% in 2019, down from 3.6% in 2018. Trade policy uncertainty, geopolitical tensions and idiosyncratic stress in key emerging market economies continued to weigh on global economic activity - especially manufacturing and trade.
• The COVID-19 pandemic is inflicting damage across global economies as lockdowns and widespread closures stifle economic activity. As a result of the pandemic the global economy is projected to contract by 3% in 2020, which is significantly higher than the 0.1% contraction experienced during the 2008-09 financial crisis. This estimate is a downgrade of 6.3% from January 2020.
• In the base case scenario, which assumes the pandemic fades in the second half of 2020 and containment efforts are gradually unwound, the International Monetary Fund (IMF) expects global economic growth to rebound to 5.8% in 2021.
• Advanced economies - where several countries are experiencing widespread outbreaks - are expected to contract 6.1% in 2020. In parts of Europe and the USA, the outbreak has been as severe as in China Hubei province and lockdowns and restrictions on mobility are extracting a toll on economic activity.
• Emerging and developing markets face a health crisis from the pandemic in addition to severe demand shock, tightening in global financial conditions and a plunge in commodity prices. Emerging market and developing economies (excluding China) are expected to contract by 2.2% in 2020. This growth rate has been marked down by 5.8% relative to IMF’s January 2020 projections.
• Growth in the Euro Area declined from 1.9% in 2018 to 1.2% in 2019. IMF estimates show that growth is expected to decline to 7.5% in 2020 before recovering 4.7% in 2021.
• Economic growth in the USA declined to 2.3% in 2019 from 2.9% in 2018. The world’s largest economy is expected to contract 5.9% in 2020 before recovering 4.7% in 2021.
• China’s economy grew 6.1% in 2019, the slowest rate of economic growth since 1990. The economy is expected to grow by a paltry 1.2% in 2020 before rebounding 9.2% in 2021.
• Global growth is expected to rebound to 5.8% in 2021, well above the long-term trend, reflecting the normalization of economic activity from the low levels expected in 2020. The advanced economy group is forecast to grow at 4.5% in 2021 while growth for the emerging market and developing economy is forecast at 6.6%.
• The projected rebound in 2021 depends critically on the pandemic fading in the second half of 2020, allowing containment efforts to be gradually scaled back and restoring consumer and investor confidence. Nonetheless, IMF estimates show that the level of estimated GDP at the end of 2021 in both advanced and emerging markets is expected to remain below the pre-virus baseline, highlighting the long-term effects of the pandemic.

 

Real GDP growth in %
	2016	2017	2018	2019	2020*	2021*
World	3.4	3.9	3.6	2.9	-3.0	5.8
Japan	0.5	2.2	0.3	0.7	-5.2	3.0
UK	1.9	1.9	1.3	1.4	-6.5	4.0
USA	1.6	2.4	2.9	2.3	-5.9	4.7
Euro Area	1.9	2.5	1.9	1.2	-7.5	4.7
China	6.8	6.9	6.7	6.1	1.2	9.2
India	8.3	7.0	6.1	4.2	1.9	7.4

 

*FORECAST
SOURCE: WORLD ECONOMIC OUTLOOK, IMF, APRIL 2019, NATIONAL TREASURY (KENYA)

SUB-SAHARAN & MIDDLE EAST ECONOMIC HIGHLIGHTS

• Real GDP growth in the East African Community (EAC) declined to 5.9% in 2019 from 6.6% in 2018, with a deceleration recorded across all countries in the bloc.
• Rwanda recorded the highest real GDP growth rate of 10.1% in 2019, supported by strong growth in the private sector and increase in infrastructure expenditure.
• In Uganda, real GDP growth declined to 4.9% in 2019 from 6.1% in 2018, while Tanzania registered real GDP growth of 6.3% in 2019, down from 7.0% in 2018.
• The COVID-19 pandemic has set-off the first recession in Sub-Saharan Africa in 25 years with the region’s economy expected to contract by 1.6% in 2020, the worst reading on record. The World Bank estimates that the pandemic will cost the region between $37 and $79 billion in estimated output losses in 2020, through a reduction in agriculture productivity, weakening supply chains, increasing trade tensions and exacerbating political and regulatory uncertainty.
• IMF forecasts expect regional economic growth to bounce back to 4.1% in 2021. However, this is subject to the depth of the slowdown in 2020 and the speed of the recovery will depend on several factors, including how the pandemic interacts with weak health systems, the effectiveness of national containment efforts and level of support from the international community.
• The coronavirus is expected to hit the region’s two largest economies —Nigeria (-3.4%) and South Africa (-5.8%) — in a context of persistently weak growth and investment. South Africa has the largest number of confirmed cases in the region, and strict measures to contain and mitigate the spread of the virus are weighing on the economy.

Real GDP growth in %
	2016	2017	2018	2019	2020*	2021*
Sub-Saharan Africa	1.4	3.0	3.3	3.1	-1.6	4.1
Nigeria	-1.6	0.8	1.9	2.2	-3.4	2.4
South Africa	0.4	1.4	0.8	0.2	-5.8	4.0
Kenya	5.9	4.9	6.3	5.6	1.0	6.1
Tanzania	6.9	6.8	7.0	6.3	2.0	4.6
Ethiopia	8.0	10.2	7.7	9.0	3.2	4.3
Uganda	2.3	5.0	6.3	4.9	3.5	4.3

 

*FORECAST
SOURCE: WORLD ECONOMIC OUTLOOK, IMF, APRIL 2020

BUDGET HIGHLIGHTS

1. The total collection of Government revenue was 26.13 trillion shillings equivalent to 79% of the total collection target.
2. Tax revenues reached 14.63 trillion shillings, equivalent to 93.4% of the target. The growth was attributed to strengthening enforcement of tax laws and proper management of Electronic Fiscal Devices (EFDs); provision of taxpayers’ education and taxpayer services; and strengthening mineral control.
3. Non-tax revenues amounted to 2.25 trillion shillings, equivalent to 80% of the target. However, the collection decreased by 42% compared to 122% of the increase in collection for the fiscal year 2019/2020.
4. Local Government Authorities (LGAs) own source reached 571.12 billion shillings, equivalent to 89.7% of the target.
5. Grants and concessional loans disbursed from Development Partners reached 2.41 trillion shillings, equivalent to 94.5% of the target. This was attributed to Government’s efforts in implementing the underlying principles stipulated in the Development Cooperation Framework (DCF).
6. Loans from domestic sources including rollover of matured Treasury bills and bonds, reached 4.45 trillion shillings, equivalent to 103.8 % of the target.
7. External non-concessional borrowings reached 1.82 trillion shillings equivalent to 78.7% of the target.

 

The following are the priority areas for the 2020/2021 budget which will stimulate economic transformation and human development:

1. Rehabilitation of Infrastructure Damaged by Floods and Fight against COVID-19.
2. Flagship Projects. The Government will continue to finance the implementation of various strategic projects including: construction of central railway line to standard gauge; construction of Julius Nyerere Hydropower Project (2,115 MW) etc.
3. Social Services. The implementation of various projects aiming at enhancing accessibility of services in health, education and skills, clean water and sanitation.
4. Agriculture and Industry. The focus will be on projects that utilize significant amount of local raw materials including agriculture, mining and natural gas in order to promote value chains.
5. Other Important Areas. The Government intends to continue to improve the livelihood of poor households through implementation of Productive Social Safety Net Program through TASAF, whereby during the second term of the third phase (2020 – 2023) a total of 2.03 trillion shillings will be spent. In this phase, implementation will cover all 185 local authorities in Mainland Tanzania and all 11 district councils of Zanzibar.

 

• Increase in PAYE thresholds - This will result to increased disposable income and reduce the tax burden to the employees, albeit marginally.
• Reduction in SDL rate from 4.5% to 4%.
• Imposition of time limit of 6 months for Commissioner General to respond to objections and resolve the tax disputes timely. This will be a relief to the taxpayers if applied as stated to reduce the interest burden on the taxpayer, which continues to accrue whilst the tax is in dispute.
• Allowable deduction for contributions made by companies towards COVID 19 and HIV AIDS relief funds.
• VAT exemption on insurance premium relating to agriculture business.
• Reduction in excise duty on various essential medical equipment to combat the COVID 19.
• Continuation of CET rates imposed in the budget of 2019 with the aim to protect local industries.
• Intention to do away with more nuisance levies as suggested by the business community.

challenges 

• Increased budget without due consideration to current global economic crisis could lead to unfriendly business environment.
• No change in VAT rates nor increase in threshold for registration currently at TZS 100 million.
• No capping of interest and penalties which continue to accrue due to delays caused by Tax Administrators in undertaking audits and appellate bodies in concluding litigations.
• No rebates or dispensation provided on account of COVID-19.
• Whilst the SDL has been reduced by 0.5 per cent, the taxpayers have been making persistent request to abolish or minimize the rate to 2 to 3 per cent.

DIRECT TAXATION

• To increase minimum threshold of employment income (P.A.Y.E) from TZS 170,000 per month (p.m.) to TZS 270,000 per month. The revised P.A.Y.E bands have been summarised below:

Individual Income Tax Rates - Old bands						Individual Income Tax Rates - New bands
Taxable Income Year 2019 - 2020 TZS. P.m.			Rate %	Cumulative Tax TZS p.m.		Taxable Income Year 2020 - 2021 TZS. P.m.			Rate %	Cumulative Tax TZS p.m.
0	-	170,000	Nil	0		0	-	270,000	Nil	0
170,001	-	360,000	9	17,100		270,001	-	520,000	9	22,500
360,001	-	540,000	20	53,100		520,001	-	760,000	20	70,500
540,001	-	720,000	25	98,100		760,001	-	1,000,000	25	130,500
Over 720,001			30			Over 1,000,001			30

• This will be a welcome relief for low income earners. In essence, workers earning taxable pay of less than TZS 270,000 per month (TZS 3,420,000 annually) shall be exempt from P.A.Y.E.

• Primary Cooperative Societies (PCS) shall be taxed on earnings over TZS 100million to provide tax relief to PCS (including SACCOS) since they have small capital.

• Special Economic Zone operators (who produce 100% for local supply) will no longer be able to enjoy the 10-year corporate income tax holiday. This is to create a fair playing ground for operators both within and outside the Special Economic Zone who produce for local supply.
• Contributions made to AIDS Trust Fund and to Government for fighting against COVID-19 shall be treated as 100% allowable deduction. However, the contributions for COVID-19 shall remain an allowable deduction until the Government announces the end of the pandemic.
• To give powers to the Minister of Finance, without seeking cabinet approval, to exempt income tax on strategic projects with total tax not exceeding TZS 1 billion based on advice provided by TRA. The proposal is aimed at fast tracking the implementation of such projects.
• To charge Capital Gains Tax (CGT) on net gains from realisation of license or concessional right on reserved land. This measure is aimed at widening the tax base.
• To charge 10% withholding tax (WHT) on commissions paid to banks and digital payment agents. This will widen the collection base for WHT and bring about equal treatment among bank operators, digital payment agents and mobile money agents.

To provide clear definitions of “beneficial owner”, “representative assesses” and “business connection” by amending sections 3, 4, 6 and 69 of the Income Tax Act. This measure will enable the country to join the global forum for exchanging tax information in order to combat tax avoidance and evasion by multinational companies. This measure aims to address transfer pricing issues between affiliated companies.

INDIRECT TAXATION

1. Grant exemption on Agricultural Crop Insurance. The measure aims to reduce the insurance costs on and encourage farmers to insure their crops from unforeseen tragedies like drought and floods.
2. Amendment of VAT Act to enable exporters of raw products to recover input tax. This measure is intended to enhance competitiveness of the products in international markets and abide to the VAT destination principle (export at 0% making it a taxable supply)   

EXERCISE DUTY

Specific duty

The specific excise duty rate shall be introduced for the following proposed non-petroleum products:

Item	HS Code	Proposed rate (TZS)
Imported powdered beer	2106.90.90	844 per Kg
Imported powdered juice	2106.90.90	232 per Kg

EAST AFRICAN COMMUNITY MANAGEMENT ACT, 2004 (EACCMA)

The proposed changes outlined below are aimed at “Stimulating the economy to safeguard livelihoods, jobs, businesses and industrial recovery.”

1. Grant duty remission for one year at the rate of 0 percent on raw materials used by domestic manufacturers of items such as Masks, sanitizers, ventilators, Personal Protective Equipment (PPE) which are used in diagnosis, prevention, treatment and management of COVID 19.
2. Import duty exemption be introduced on the following:

1. Supplies for diagnosis, prevention, treatment, and management of epidemics, pandemics and health hazards as recommended by the competent authority in the Ministry responsible for Health;
2.  Imported implements by person or entity engaged in Horticulture, Aquaculture, Agriculture or Floriculture in order to promote growth of Horticulture, Aquaculture, Agriculture or Floriculture sector in the country; and
3. Fertilized eggs for incubation imported by person or entities engaged in poultry farming this economic activity.

1. Valuation of imported Kitenge be increased to USD 1 (1.5 times from current rate USD 0.40) per meter. This measure aims to discourage under invoicing and under declaration during importation.
2. In addition to some measures that were effected during the financial year 2019/20 which remain the same in the proposed financial year 2020/21, the following new changes (duty remissions) have been proposed for the financial year 2020/21:

 

Item	HS Codes	New rate	Old rate	Aim
Cash Registers, Electronic Fiscal Devices (EFD’s) and Point of Sale (POS) machines	8470.50.00; and 8470.90.00	0% for one year	10%	To strengthen government revenue collection
Packaging materials (used for UHT milk)	4819.50.00	0% duty remission for one year	25%	To reduce production costs to local manufacturers of UHT milk and make it affordable to customers
Corks	4503.10.00	0% duty remission for one year	10%	To reduce production costs to manufacturers of local wine, create more employment and promote grapes farming
Ceramic tiles	6907.21.00; 6907.22.00 and 6907.23.00	35% for one year	25%	To protect local manufacturers of these products and create more employment
Tea, whether or not flavoured	09.02.	35% for one year	25%	To protect local tea processors and promote growth of employment in agricultural sector
Sacks and bags, of jute or other textile bast fibres of a tariff heading 53.03	6305.10.00	35% for one year	25%	To protect local manufacturers of sisal bags, promote employment in sisal farming
Cocoa powder	1805.00.00	10% for one year	0%	To promote cocoa farming, create more Employment and increase Government revenue
Packaging materials (used by local processors of coffee)	7310.21.00; 6305.10.00; 3923.50.10; 3923.50.90; 3920.30.90 and 48.19	0% duty remission for one year	25%	To promote value addition on coffee product, reduce processing costs and promote employment
Sacks and bags of polymers of ethylene (used by domestic cashew nuts processor)		0% duty remission for one year		To promote value addition on cashew nuts products, reduce processing costs of cashew nuts and promote employment
Packaging materials (used by domestic processors of cotton link)	3920.30.90; 6305.39.00; and 7217.90.00	0% duty remission for one year		To attract investment in cotton link processing to add value on locally grown cotton

 

In order to ensure efficient and effective procedures in determining objections to tax decisions, tax payers are required to submit documents to the Commissioner within 30 days (from the time a notice of request of information is received) and the Commissioner is required to decide within 6 months

LOCAL GOVERNMENT FINANCE ACT

The Minister for Local Governments shall be responsible to collect City Service Levy from telecommunication companies and distribute the same to Local Government Authorities (LGA) within fourteen days from the date of collection. The distribution will be done based on a formula derived from the amounts collected from telecommunication companies in respective areas. This is aimed at reducing disputes between LGAs and telecommunication companies.

Fees for outdoor advertising in relation to branding of motor vehicles used for distribution of products be reduced from TZS 10,000 to TZS 4,000 with an aim to improve and stimulate the business environment.

Livestock Sector

The following are the proposed amendments in the Fees and Levies charged to the Livestock sector:

1. Abolish movement permit fee of TZS 5,000 for skin within and outside the district.
2. Reduce export and import permit fees on livestock and products as indicated in Table 1 and 2 respectively.

 

No.	Livestock/Product	Unit	Current Fee TZS	Proposed Fee                      TZS
1	Cattle	Each	30,000	25,000
2	Sheep/Goat	Each	7,500	5,000
3	Beef	1 Kg	150	100
4	Animal feed	1 Ton	20,000	10,000
5	Table Eggs	1 Tray (30 eggs)	1,000	100

Table 1 - Export permit fees

No.	Livestock/Product	Unit	Current Fee          TZS	Proposed Fee TZS
1	Mule/Donkey	Each	10,000	5,000
2	Camel	Each	10,000	5,000
3	Beef	1 Kg	5,000	4,000
4	Animal Feed	1 Ton	20,000	10,000

Table 2 - Import permit fees

1. Increase export and import permit fees for Livestock, wild animals and their associated products as shown in Table 3 and 4 respectively.

 

No.	Livestock/Product	Unit	Current Fee                       TZS	Proposed Fee TZS
1	Horse	Each	30,000	50,000
2	Dog/Cat	Each	20,000	50,000
3	Camel	Each	30,000	50,000
4	Wild animal	Each	30,000	50,000
5	Semen	Per Straw	1,000	2,000

Table 3 - Export permit fees

 

No.	Livestock/Product	Unit	Current Fee                       TZS	Proposed Fee                  TZS
1	Horse	Each	10,000	50,000
2	Dog/Cat	Each	30,000	50,000
3	Table Eggs	1 Tray (30 eggs)	2,500	5,000

 

The requirement of seal by the Commissioner of Oaths to show that one has fulfilled the requirements of the Act when opening a company or renewing a registration is being abolished through the repeal of section 16 (2) of the Companies Act.

Table 4 - Import permit fees

1. Increase Quarantine fees from TZS 200 to TZS 500 per Goat or Sheep.
2. Charge movement permit fees on:
   • horns, hooves and bones from cattle, goat and sheep within and outside the district – TZS 20,000;
   • on animal feeds within and outside the district – TZS 5,000; and
   • on transit livestock and their associated products to other countries, depending on the livestock product.

 

Fisheries Sector

The following are the proposed amendments in the Fees and Levies:

1. Increase export license fee on Shark fins/jaws from USD 2,700 to USD 5,000 in order to protect the species;
2.  Charge a fee of TZS 30,000 Health Certificate (QA/APP/02) for export fish and fishery products;
3. Abolish royalty of USD 0.4 per kilogram of targeted fish catches from Deep Sea fishing;
4. Reduce export license fee on Fish and their associated products from Fresh water;
5. Reduce import license fees on  Fish and fishery products from Marine water;
6. Reduce export royalty on fish and fishery products;
7. Charge export license fee on Fish Maws and Shell cover as shown;
8. Charge export permit fee on fish and fishery products including live crab, live lobster and live aquarium fish wild caught.

SUGAR BOARD OF TANZANIA (SBT)

Import Levy charged by SBT on industrial sugar to be reduced to USD 7.5 per metric ton.

BUSINESS REGISTRATION AND LICENCING ACT (BRELA)

OCCUPATIONAL SAFETY AND HEALTH AUTHORITY (OSHA)

The following are proposed for abolishment:

1. Occupational Safety and Public Health Training fees of TZS. 250,000 for each participant; and
2. Inspection fees which is charged at 80 percent of administration fee.

 

The minister proposed to reduce accident investigation fees from TZS 500,000 on each expert who conducts investigations to TZS 120,000 on each expert but the gross amount should not exceed TZS 1,000,000.

FIRE AND RESCUE FORCE

The following fees are proposed for reduction under Fire and Rescue Act, CAP 427:

Fire and rescue fees on	Measurements	Current fees (TZS)	Proposed fees (TZS)
Dealers of fire and rescue equipment		500,000	200,000
Mining areas	Areas less or equal to 2,000 square metre	6,000,000	100,000
	2,001 to 4,000 square metre	6,000,000	150,000
	4,001 to 9,000 square metre	6,000,000	200,000
Gas deposit	Less than or equal to 10 tons	2,000,000	1,500,000
	11 to 20 tons.	NIL	2,000,000
Gas cylinder shops	Less than or equal to 100 square metre	100,000	40,000
Mini- super market, retail and whole-sale shops		40,000	20,000
Mini Hydro	Less than 10 Megawatt	6,000,000	200,000
Micro lending institution (previously termed as financial institution)	Respective of area coverage	NIL	Between TZS 40,000 - TZS 50,000

THE VOCATIONAL, EDUCATION AND TRAINING ACT, CAP 82

A reduction in the Skills Development Levy from 4.5 percent to 4 percent has been proposed in order to relieve employers’ overheads.

THE ELECTRONIC AND POSTAL COMMUNICATION ACT, CAP 306

The following amendments are proposed under this Act:

1. Exclusion of Companies owned by Government by 100 percent or 25 percent or more from being listed on the stock exchange. 
2. Exclusion of telecommunication tower leasing companies from compulsory listing on the stock exchange.

THE LAND ACT, CAP 4

In order to discourage land occupancy without Certificate of Occupancy, the minister proposed and amendment of the Land Act, no.  4 of 1999 by adding section 29A immediately after section 29 which will set mandatory requirement to any person with a surveyed land and a plan approved by Ministry responsible for Land, to apply to the Commissioner for Lands for a right of occupancy within 90 days from the date of approval.

THE MINING ACT, CAP 123

Introduction of a new section which requires the applicant for new or renewal of mining license to have Taxpayer Identification Number (TIN) and Tax Clearance from Tanzania Revenue Authority.

THE MOTOR VEHICLE (TAX REGISTRATION AND TRANSFER) ACT, CAP 124

A Special Registration Number for Motor Vehicle has been introduced at a fee of TZS 500,000 in order to enable customers to be allocated with their preferred registration number, subject to availability.

THE PUBLIC FINANCE ACT, CAP 348

It has been proposed that contribution to be made to the Consolidated Fund by to include Tanzania Investment Centre (TIC), Tanzania Fertilizer Regulatory Authority (TFRA), Government Procurement Services Agency (GPSA) and National Identification Authority (NIDA) that contribute dividends or 15% percent of their gross turnover to Consolidated Fund.

THE TREASURY  REGISTRAR ACT, CAP 370

Section 46 of the Finance Act 2015 added a new section 10(A) to the Treasury Registrar Act.

The proposal for 2020/2021 is to allow the Treasury Registrar’s office to collect 70% of the excess revenue from Government Parastatals, Institutions and Agencies, including those financed by Government Budgets. The operating expenditure ceiling is as defined in Section 10 (A) (1) and (2) in the Finance Act, 2015.

MINISTRY OF NATURAL RESOURCES AND TOURISM

Changes introduced to fees and levies charged on various services provided by National Museums of Tanzania to reflect the current market value as the last review and amendments were done in 2002. The proposed amendments are as follows:

No.	Service	Current Fee/Charge (TZS)	Proposed fee/Charge (TZS)
Residents and Citizens from EAC countries
1.	Museum entrance fee
	i)   Adult	1,500	2,500
	ii)  Students	500	1,000
2.	Museum entrance fee in Group
	i)         1-15	5,000	10,000
	ii)        16-30	7,000	15,000
	iii)       31-50	10,000	20,000
3.	School project	2,000	2,500
4.	Research fee	9,000	15,000
5.	Library /studying	1,000	2,000
6.	Still picture /video shooting – educational	130,000	300,000
7.	Commercial still picture /video shooting	260,000	500,000
8.	Library services / archival pictures	2,000	5,000
9.	Temporary exhibition halls	500,000	600,000
10.	Public Addressing System - PA	250,000	300,000
11.	Exhibition panel	10,000	20,000
12.	Special reservation to see original hominids		20,000
13.	Conference room	700,000	750,000
Foreigners Outside EAC Countries
1.	Museum entrance fee
	i)   Adults	6,500	12,000
	ii)  Student	2,600	6,300
2.	Museum entrance fee in Group
	i)   1 – 15	19,500	30,000
	ii)  15 - 30	20,000	35,000
	iii) 30-50	30,000	55,000
3.	Research fee	$200	$300 per month
4.	Library services / archival pictures		20,000
5.	Music system	250,000	300,000
6.	Visit Original Hominid	$15	$30 per head

 

NON-TAX REVENUE COLLECTION SYSTEM FROM TOURISM AND FOREST SECTOR

The following amendments are proposed:

• To give powers to Tanzania Revenue Authority to collect non-tax revenues which are currently collected by Tanzania National Park Authority (TANAPA), Ngorongoro Conservation Area Authority (NCAA) and Tanzania Wildlife Management Authority (TAWA).
• All non-tax collection from these sources will be deposited in a consolidated fund instead of the current retention system.
• The Government shall allocate funds to these authorities or agencies through the budgetary allocation system.

 

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