CTI calls for streamlined taxation in food processing sector

14Sep 2017
Angel Navuri
The Guardian
CTI calls for streamlined taxation in food processing sector

The current taxation system in the country’s food processing sector has been blamed for difficulties experienced by manufacturers in providing more jobs due to over-regulation and over-taxing of manufactured products.

A recent Confederation of Tanzania Industries (CTI) position paper on regulatory authorities shows that although the manufacturing sector generates tax revenues to the tune of 248 billion/- per year, 40 per cent of the total tax generated (around 100bn/-) is being milked from industries in the form of charges imposed by compliance-enforcing agencies.

According to Data on HuruMap, a platform that aggregates publicly available data, Tanzania has a population of approximately 44.9 million and the country’s manufacturers depend on raw materials produced in the rural areas where 80 percent of this total population lives.

The data indicates that people aged 20 to 39 constitute 28 per cent of the total rural population, and they are the ones who need regular employment to be able to support their families. But it is they who will not be employed in the current situation.

Again, 50 per cent of the rural population made up of children aged below 18 will not be able to get basic needs, while the 4 per cent of elderly citizens aged above 65 will also have a limitation of basic needs despite needing closer care.

The high compliance costs are a result of numerous regulatory agencies, overlapping inspections, and multiple fees, according to the findings.

The system is not service-oriented towards manufacturing companies and leads to reduced competitiveness on the international stage.

Currently, food processing is regulated by more than 15 regulators, involving multiple fees, duplication of regulatory functions, delays, bureaucracy, and some elements of corruption.

The study shows that for a relatively simple task as registering a food processing company, applicants have to go through 19 processes, including multiple inspections of the facilities as well as multiple testing of products.

According to the CTI paper, basic processes for licensing a food producing firm include applying for clearance of a proposed company name at the Business Registration and Licensing Agency (BRELA) in order to get a business license; applying to the Tanzania Revenue Authority (TRA) for a Tax Identification (TIN) Number and PAYE scheme; and applying for a business license from the regional trade officer or Ministry of Industries and Trade (depending on the nature of the business).

Manufacturers are also required to ensure that their premises are inspected by TFDA through local government health officers in order to be issued with a Premise Registration Certificate.

Other inspections are done by NEMC to check on environmental compliance and issue an Environmental Impact Assessment report; by the Fire and Rescue department; a chemical inspection by the government laboratory agency for radiation; TFDA tests for product safety and quality; inspection by OSHA to check on compliance with labour standards; and Tanzania Bureau of Standards (TBS) tests on each product to ensure that it meets minimum standards.

As a result of over-taxation and over-regulation of the sector, over 5,000 direct jobs and 360,000 indirect jobs are lost to the manufacturing sector per annum, the report says.

CTI has therefore called on the government to come up with relatively simplified processes to reduce the regulatory burden on companies without compromising consumer security and safety. The food-processing sector comprises the largest proportion of manufacturing firms as almost a quarter of all registered manufacturing enterprises are in that sector.

The sector provides employment to about 58,000 people, which represents 56 per cent of total employment in the manufacturing sector. Food processing in general means raw foodstuffs being turned into suitable items for consumption, cooking or storage.

However, the CTI paper states that there is no reason for a business to have to formally and separately apply for business name, TIN number, and business license, all of which are mandatory requirements for registering a company.

It suggests that BRELA could suffice and send its dossier to TRA, which could then issue the TIN number as a basic requirement for all companies.

TFDA inspections could be made more comprehensive to enable their results be recognised and shared among other authorities such as TBS, the government chemist laboratory agency (GCLA), and LGAs. And premise licenses given by TFDA could also be recognised by TBS to avoid multiple inspections, the paper says.

It notes that inspections from non-food related agencies like OSHA, NEMC and the Fire and Rescue Department are probably necessary as they cannot be handled by TFDA or other regulators related to agro-processing.

It suggests that TFDA, TBS and other agencies such as GCLA, Tanzania Atomic Energy Commission (TAEC), and the Tanzania Tropical Pesticides Research Institute can avoid testing the same product multiple times.

The most efficient method, it says, should be for one agency to collect the samples and send them to all accredited laboratories for testing. The government should place the coordination of all agro-processing controls within one agency which will handle inspections and registration by making it the responsibility of BRELA to share the necessary information.