Ministry of Finance has proposed an introduction of a new VAT rate of 10 per cent for selected VAT relieved beneficiaries.
This measure will compel all beneficiaries enjoying special relief under the third schedule of the Value Added Tax Act to pay VAT for their taxable supplies requirements at a reduced rate of 10 per cent instead of 18 per cent.
The Finance Minister, Dr Mgimwa said those who would be affected, among others, are private companies, individuals and TIC Certificate holders except those who are enjoying exemptions under the existing agreements.
Furthermore, it will affect Non Governmental Organizations (NGOs) except those which are providing donations such as food supplies and medicaments to children and orphanage care centers and schools.
Also, Dr Mgimwa asked the house to approve, amending item 19 of the second schedule to the VAT Act in order to include “Electronic Fiscal Devices” in the list of exempt items.
“The measure intends to make the product affordable to the business community and encourage its use for the improvement of compliance,” the finance minister said.
A report dubbed one billion question: How Can Tanzania Stop Losing So Much Tax Revenue, estimates that Tanzania one of the poorest countries in the world is losing around 1 billion US dollars (1.6tr/-) in tax revenue annually mostly through tax evasion, capital flight and tax incentives.
Also, the minister wants to exempt VAT on various equipments (Compressed Natural Gas and Piped Natural Gas) that will be used for storage, transportation, and distribution of natural gas.
This measure is intended to promote the usage of natural gas in various sectors of the economy including motor vehicles, domestic and industrial use.
“The measure is also expected to preserve forests, reduce environmental degradation and encourage production of gas cookers in the country,’ Dr Mgimwa said.
Meanwhile, Minister for Finance and Economic Affairs said yesterday in a bid to implement effectively new finance bill 2012/13 all unproductive and unnecessary expenditures should be avoided.
Dr William Mgimwa said therefore it is important for the ministries, departments, regions and local authorities to give opportunities to the private sector to contribute in building the economy.
“…every citizen is called upon to participate effectively in the utilization of available opportunities by providing services and engaging in productive activities in order to increase income,” the minister told the Parliament when reading the budget.
He said this budget directs investment of national resources in few priority areas with a view to accelerate economic growth and reduction of poverty.
The minister caution follows the fact that in 2011/12 domestic revenues, including revenues from Local Authorities, were below target and donor commitment to budget basket is not delivered on time.
Data show that total collection up to this April reached 5.68tr/- equals to 80 per cent of estimates of collecting shillings 7.13tr/- for year 2011/12.