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Budget silence on the manufacturing sector upsets CTI
2005-06-12 07:42:34
By Bilal Abdul-Aziz
The Confederation of Tanzania Industries (CTI) yesterday commended the 2005/06 National Budget, but said it was silent on the manufacturing sector.
Confederation Chairman, Reginald Mengi, said this in Dar es Salaam yesterday, when briefing the press on the views of CTI on this year`s Budget that the Minister of Finance, Basil Mramba, tabled in Parliament on Tuesday.
In addition, the CTI Chief expressed deep concern over dependence of the Budget on foreign aid, the imposition of Value Added Tax (VAT) on some goods as well as Budget focus on short-term revenue generation, among others.
``The speech of the Minister for Finance was silent on measures for promoting the manufacturing sector in Tanzania,`` said Mengi.
The confederation‘s view, he said, was that industries should be given room to grow and expand, and in turn pay appropriate taxes to the government.
``Measures that the CTI had proposed to the government in the course of Budget preparation, as a member of the Task Force on Tax Reform, have been ignored,``lamented Mengi, adding:
``We note that this year, of all the 35 proposals that we submitted to the Task Force, only 7 have been taken on board.
We think our proposals would have created the catalyst for industries to grow for future revenue generation.``
However, he said: ``We are hopeful that these issues will be addressed by the relevant sector ministers.``
He noted that the sector has been contributing about 8 per cent to the Gross Domestic Product (GDP) over the past decade.
``Products made in Tanzania are largely uncompetitive due to costs embedded in production process such as electricity, water and transportation,`` noted the CTI boss.
Regarding the general focus, the CTI Chief noted with deep concern that the Budget had focused largely on short-term revenue generation.
``We are of the opinion that this Budget like many others has focused only on short-term revenue generation instead of using the Budget as an instrument for stimulating growth for future revenue maximization,``Mengi said.
He further noted that the 20 per cent Value Added Tax (VAT) maintained by the government was high compared to that of other East African countries.
``We are of the view that reducing the rate will stimulate demand for more goods and services and increase revenue collection in the long-run,`` Mengi said.
He also expressed CTI`s concern on government`s silence on the zero rating of VAT on locally manufactured mosquito coils and sanitary pads.
``Charging VAT on local mosquito coils makes them expensive relative to imported ones, which are not charged VAT,`` he insisted.
Regarding dependency of the budget on donors, he said the current 40 per cent dependency was too high and makes the budget donor-dependent.
``We are hopeful that the government with its partners in the private sector will continue to work together to reduce this dependency,`` he added.
The CTI Chief said his confederation welcomes the proposal of raising the personal income tax threshold to 80,000/- from 60,000/- per month.
He explained that implementation of the proposal would provide relief to low wage earners and increase their disposable income which CTI believes would be used to buy goods and services produced in Tanzania.
``We call on the government to continue increasing the personal income tax threshold, as a strategy to implement the National Strategy for Growth and Reduction of Poverty (NSGRP-Mkukuta),” he advised, pointing out:
``We had proposed a threshold of 90,000/- to start with. In neighbouring Kenya, the threshold is equivalent to 156,000/-.``
In the health sector, he said that CTI counted with appreciation continuing government efforts to provide free medical services to pregnant women, children aged below 5, as well as leprosy, tuberculosis and HIV/Aids patients.
To improve the sector further, the confederation urges that mechanisms, controls and administrative measures be taken to ensure that the target groups are the real beneficiaries, he stressed.
``Similar measures should be extended to manage subsidized fertilizers,`` he added.
In the education sector, he remarked, among other things, ``We urge that the quality of education be given emphasis.
Provision of education materials, including books as well as trained teachers, is vital for development of our human resources.``
CTI, the chairman said, welcomes VAT pardon on railway locomotives, spare parts and accessories, saying the move would lead to improvement of the railway system, a transport medium, which country`s key economic sectors, agriculture and industry, as well a large proportion of Tanzanians depend on.
Regarding the transformation of Tanzania Investment Bank (TIB), he said that the move was commendable and crucial though had come late.
``We welcome the process…a move that has been long overdue. We urge the establishment of more development banks to provide the necessary long term capital for the productive sector, specifically manufacturing,``said Mengi.
He described the increase in excise duty on alcoholic beverages and cigarettes by the equivalent of the inflation rate as `acceptable.`
However, he said that soft drinks should not attract excise duty, as this is not a ‘sin vice’ product. ``Many countries in Africa have abolished excise duty on soft drinks, a move that has increased sales and raised government revenue from other taxes, such as VAT,`` he explained.
He said confederation‘s view was that the skills and Development Levy of 6 per cent was high and should be reduced to 2 per cent to encourage permanent employment and reduce the cost of doing business.
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