Zanzibar government yesterday announced tax and fee rises in a bid to cover a deficit of 29.1bn/- in its 648.1bn/- budget for the financial year 2012/13.

Expected tax increment was announced by the Minister of State in the President’s Office (Finance, Economic and Development Planning), Omar Yusuf Mzee, when he tabled government budget estimates for 2012/13 financial year in the House of Representatives.

According to the minister there would be amendments to four tax and excise duties, including Stamp Duty Act of 1996, Hotel Act of 1995, Port-fee Act 1999, Petroleum Act of 2001, Tax management Act 2009, Value Added Act of 1998, Zanzibar’s Revenue Authority Act 1996 and Professional Training Act of 2006 in order to allow tax and fees adjustments.

In order to cover the deficit the minister said the government plans to increase taxes charged to hotels, tour operators, restaurants and VAT — from 15 per cent to 18 per cent — with the expectation of increasing revenue by 1.96bn/-.

Fees for travelers plying between Zanzibar and Mainland will rise from 1,000/- to 2,000/- while passengers plying between Unguja and Pemba would pay an extra 1,000/-, enabling the government collect 2 billion/-, which will be channeled to purchase of school desks.

Taxes on fuel imports would also shoot up, according to minister Mzee.

He explained that the government is expected to adjust fees charged on among others, port services, while mechanisms would be put in place to ensure expatriates pay correct taxes.

According to the minister, the government expects to remove tax exemptions and incentives (holidays) on investments operating under the Export Processing Zone (EPZ).

The minister noted, however, that the move would not touch investments in progress.

Mzee clarified that the government’s tax and fee adjustment strategy intends to cover up the expected budget deficit and help the country out of donor dependency.

However, he said the government will impose Value Added Tax on staple foods, health, transport services, agriculture and livestock activities in order to increase incomes of farmers and the general public.

In the financial year 2012/13, according to the minister, the government plans to spend a total of 648.9billion, out of which 307.8 billion would be channeled to recurrent expenditure (equivalent to 47 .4 per cent) and 341.1 billion for development expenditure.

The government expects to get 293.2 billion/- from donors through implementation of various development projects, and 187.8 billion/- would be sourced (as loans) from financial institutions while 105.4 billion would come from taxes and duties.