Question: Will govt stick to its guns or bow to MPs demands?

20Jun 2016
The Guardian Reporter
The Guardian
Question: Will govt stick to its guns or bow to MPs demands?

Finance minister Philip Mpango is today set to respond to legislative indignation over proposed new taxes on tourism services and MPs gratuity payments

By Guardian Reporter, Dodoma

Finance minister Philip Mpango

Finance minister Philip Mpango is today set to respond to legislative indignation over proposed new taxes on tourism services and MPs gratuity payments

By Guardian Reporter, Dodoma

All eyes and ears will be directed to Dodoma today when the government is expected to start responding to a number of burning issues and concerns raised by ruling CCM party legislators over the past week with regard to the 2016/17 national budget proposals.

Finance and planning minister Philip Mpango is set to issue the final government position on several controversial new taxes proposed in the new budget, including the imposition of a 5 per cent levy on MPs’ final gratuity packages after five years of parliamentary service.

With opposition MPs missing most of the debates as they continued their boycott of parliamentary proceedings chaired by deputy speaker Tulia Ackson, CCM legislators have been at the forefront in protesting loudly against the proposed tax on MPs final benefits.

And according to reports, the ruling party MPs agreed during their caucus held on Friday afternoon to collectively reject the proposal – and probably several others –literally sending the government back to the drawing board.

However, the rules state that MPs are not allowed to make changes to the main government budget presentation, but can only effect changes in the votes, provided the budget ceiling is not disturbed.

The following are some of the major concerns raised by MPs (almost exclusively from the ruling party) during parliamentary debate on the proposed budget:

Value Added Tax (VAT) on tourism sector

MPs called on the government to drop a proposed new VAT levy on tourism services in a bid to keep the sector afloat, arguing that such a tax will make Tanzania the most expensive tourist destination in East Africa.

They said Tanzania is locked in fierce competition for tourists with countries like Mauritius, South Africa, Rwanda and Kenya, noting Kenya for one has taken the reverse route by opting to remove VAT from tourist services as part of their own strategy to remain competitive.

Tax on MPs’ gratuity

The government proposed that a 5 per cent tax be imposed on MPs’ gratuities payable to them at the end of their five-year tenure of office.

But the proposal drew some remarkably strong objections from various legislators who, among other things, claimed that taxing their gratuity would be tantamount to subjecting them to double taxation since their monthly salaries as MPs are taxed PAYE (Pay As You Earn).

Other MPs proposed that taxes should also be imposed on the gratuities paid to the president, vice-president, prime minister, Speaker, deputy speaker, and cabinet ministers if the proposal is to stay. They argued that imposing tax on gratuity payable to MPs alone would be discriminatory.

Hiking of motorcycle and vehicle registration fees

Many MPs also voiced concern over the proposal to increase motorcycle registration fees from 45,000/- to 95,000/-, saying this could have negative consequences on efforts to reduce youth unemployment figures since many of these youths have decided to turn to the motorcycle taxi (bodaboda) business to try to earn a living.

The legislators also vehemently criticized the proposal to hike the fees for personalized registration numbers from 5m/- to 10m/- for every three years.

When presenting the budget, minister Mpango said this was aimed at reflecting the true value of money. But according to the criticizing MPs, having a personalized number is optional so people could just de4cide to shun away from it, thus completely denying the government that line of revenue.

TRA to collect property tax

This proposal was also strongly opposed by MPs, many of them arguing that it will severely affect local government revenues and thus paralyze development and administrative programmes.

According to the MPs, most district councils have been relying on property tax as their most reliable own source of revenues, and so transferring the role of collecting the tax from local government to Tanzania Revenue Authority (TRA) level could be tantamount to ‘killing’ the councils.

Although minister Mpango said the TRA would institute proper procedures of remittance of property tax collected to the respective local governments, the MPs said such a system was in place in the past, but ended up proving a failure.

Increasing specific duty on second-hand (mitumba) clothes

Several legislators expressed fears that the measure will affect the larger population of people who earn their living through the business of selling second hand clothes (mitumba).In his budget presentation, Dr Mpango announced a proposed increase of specific duty on second hand clothes from $0.2 to $0.4 per kilogram.

The measure, according to the minister, is aimed at gradually phasing out importation of used clothes and footwear in the East African Community region since EAC partner states have agreed to strategically focus on promoting their own textile and shoe making industries to adequately cater for the regional market.

But according to opposing MPs, Kenya as the EAC partner with the highest quantity and quality of such factories is poised to benefit most from the EAC Customs Management Act of 2004.

Slashing of funds for CAG Office’s

MPs exerted pressure on the government to increase funds for the office of the Controller and Auditor General (CAG) to spearhead the crusade against graft and theft of public monies. The legislators claimed that by allocating insufficient amount of funds to the CAG’s office, the government would be automatically rendering that office inefficient.

While the government allocated over 70bn/- to the CAG’s office during the 2015/16 financial year now winding up, only 44bn/- has been allocated to the same office for the 2016/17 financial year.

Transfer of shares at DSE

MPs expressed concern over a proposal to remove tax exemptions on non-investment assets (shares listed at the Dar es Salaam Stock Exchange - DSE), insisting that such a measure will curtail the growth of the bourse and give neighbouring countries, especially Kenya, an upper hand.

They said if the government sticks to its guns on this proposal, the investment climate could be rendered uncompetitive.