Businesses in Tanzania are accusing the
government of being anti-business after its recent announcement that it will
introduce value added tax on ancillary services.
During an East Africa Business Council
meeting this month, Gilead Teri, the director of policy at the Tanzania Private
Sector Foundation, said the introduction of VAT on ancillary services provided
for goods in transit had resulted in a drastic decrease in the amount of
transit cargo shipped via the Dar es Salaam port; competing ports don’t charge
VAT on ancillary services.
“Introduction of 18 per cent VAT on
tourism services such as game driving, water safaris, animal or bird watching,
park fees and ground transport services will be unfavourable for business,”
said Mr Teri.
The measures to broaden the tax base
have started to bite, with some hotels in Dare es Salaam turning their
facilities into hostels.
Kassim Omar, the chairman of the EABC
Uganda Chapter and national chairman of the Uganda Clearing Industry and
Forwarding Association, told the meeting that businesspeople require 10
documents to import or export to Tanzania, which attract costs estimated to be
double the cost incurred in other sub-Saharan countries.
“Having discriminatory taxes between
domestic and imported products from EAC partner states is against Article 15 on
National Treatment of EAC Customs Union Protocol, which prohibits EAC partner
states from enacting legislation or applying administrative measures that
directly or indirectly discriminate against the same or like products of other
partner states,” Mr Omar said.
He further claimed that unlike other EAC
partner states, Tanzania has been slow in implementing the Single Customs
Territory.
No reversal
However, on Monday, President Magufuli
categorically stated that the country would not reverse its decision to charge
VAT on ancillary services.
“We are determined to exhaust all
available sources in our quest to increase revenues to fund development
projects. It’s better to have 500,000 tourists who pay tax than host two
million who do not,” President Magufuli said.
“In the past, we had very many
containers at the port that were not paying taxes, but the situation has
changed. It is better to have fewer ships docking and paying requisite taxes,”
the president added.
However, Paul Wallace, the CEO of
Tanzania International Container Terminal Services, said that, contrary to the
claim that containerised cargo was declining, the opposite was true.
In addition, the Tanzania Revenue
Authority published figures of fees charged at Dar es Salaam port compared with
Mombasa.
The TRA stated that whereas the cost of
service on a 20ft container of transit goods to/from Rwanda is $4,169.81 at Dar
es Salaam port (VAT inclusive), at Mombasa port it costs $4,465.00 (VAT
exclusive).
“TRA
therefore confirms that VAT on ancillary services as defined by the law is not
a factor that renders Dar es Salaam port uncompetitive,” said Commissioner
General Alphayo J. Kidata in a statement.
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