By Annie Njanja
Tanzania
has brushed off calls to scrap Value Added Tax (VAT) on transit goods, saying
its port service charges still rank lower than what traders face in Kenya.
Tanzania Revenue Authority (TRA) says
charges at the Port of Dar es Salaam still fall below what its rival, Mombasa
Port, charges on transit goods even after the taxes are absorbed by traders.
The agency attracted protest from
traders when it imposed an 18 per cent tax on key services, which were previously
zero-rated at Dar port.
The affected services include loading
and unloading of a ship (stevedoring), securing cargo, inspection, preparation
of customs documentation, container handling and storage of goods.
“TRA therefore confirms that VAT on ancillary
services as defined by the law is not a factor that renders Dar es Salaam port
non-competitive,” TRA Commissioner General Alfayo Kidata said in a statement
circulated yesterday.
“The Act charges VAT at the rate of
zero, supply of services involving international transport of goods.., this
does not apply to ancillary services rendered on transit goods.”
The TRA says individuals subcontracted
to offer transport services remain exempted from paying the VAT as long as
there is proof of payment by the original consignee.
That means a transporter on transit must
provide documents that include road consignment note of the respective goods,
copies of customs documents, truck movement sheet, exit note from country of
destination and a copy of invoice to TRA.
Tanzania Truck Owners Association,
Tanzania Association of Freight Forwarders and Tanzania Shipping Agents
Association have been piling pressure on TRA to scrap VAT on transport and
ancillary services saying it could give Kenya an edge in transit business.
Mombasa and Dar ports compete for
business from landlocked country traders. Yesterday, the TRA published figures
showing that Tanzania remains a competitive transit route tax for a 20 and 40
foot container.
The agency says delivery order fees
remained at Sh1,500 ($15) cheaper in Dar when compared to Mombasa Port.
Transport cost is also Sh37,000 cheaper for a 20 foot container.
The cost of services on transit goods
for a 20 foot container is Sh29,400 cheaper in Tanzania.
The cost of services on 20 foot container
of transit goods to Rwanda is Sh416,900 in Dar es Salaam port with VAT
inclusive compared to Sh446,500 in Mombasa port,” the agency says
The figures show total 40 foot container
of transit goods from Rwanda is Sh398,100 in Dar es Salaam port and Sh434,100
in Mombasa.
“TRA therefore confirms that VAT on
ancillary services as defined by the law is not a factor that renders Dar es
Salaam port non-competitive,” said Mr Kidata.
The two
ports are the main gateways to the East African region and also service markets
in South Sudan and the Great Lakes region, handling key items including fuel,
consumer goods and other imports as well as exports of tea and coffee from the
region.
Kenya and Tanzania
are caught in a head-to-head race to become the preferred regional transport
hub amid massive expansion projects in sea ports, connecting railway and road
networks.
Tanzania, like its
neighbour Kenya, wants to capitalise on a long coastline and upgrade existing
rickety railways and roads to serve growing economies in the land-locked heart
of Africa.
The country plans
to spend Sh1.3 trillion ($14.2 billion) to construct a new rail network in the
next five years, financed with commercial loans as the country aims to become a
regional transport hub.
Oil and gas
discoveries in Kenya, Uganda and Tanzania have turned the East African region
into an exploration hotspot, but transport infrastructure in those countries
has suffered from decades of under-investment.
Kenya is also
constructing an Sh327 billion 609- kilometre new standard gauge railway line
between Mombasa and Nairobi to increase the movement of cargo from the port and
boost the countries competitiveness.
Kenya is also
building a second container terminal valued at Sh28 billion in Mombasa to
handle increased trade within the region driven by a boom in the construction
industry, vast infrastructure development and an emerging middle class.
The government
plans to expand the Mombasa-Nairobi highway (A109) into a dual carriageway in
yet another move aimed at easing traffic to Mombasa port.
The 485km
Nairobi-Mombasa highway is deemed critical for trade in the region because of
its key link to the Mombasa port.
Besides the
Nairobi-Mombasa highway, the government also plans to expand the 157km
Nairobi-Nakuru highway into a dual carriage.
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