East African Business Week

DAR ES SALAAM, TANZANIA - The International Monetary Fund (IMF) has urged the Tanzanian Government to increase tax on mining activities as a strategy to boost revenue collections to meet its budgetary obligations.
  The mining sector contributes about 52 per cent of country's exports, but it only accounts for three per cent of the country's Gross Domestic Product (GDP).
  "Strengthening Value Added Tax (VAT) compliance and enhancing the taxation of the mining sector will be a big boost to revenue mobilization," said the IMF Executive Board assessment of the economy through Article IV Consultation instrument with the Government last week.
  The board reiterated its stance on broadening of the tax base, reducing exemptions and improving public financial management.
  In a move to boost the country's income, the Deputy Minister for Energy and Minerals, Mr Adam Malima said, the Government has decided to review the mining's tax exemption package with a view to collect more income for the country's developments.
  Deputy Minister Malima said the Government and mining firm's experts are already reviewing the sector's tax exemptions package with a view to creating a mutually beneficial situation.
  He added that the Government is going through all the components in the tax exemptions package, before it decides which to remove, and which should be retained.
  "We want to overhaul the entire tax exemptions package and not just on fuel imports," said Mr Malima. "Review of the tax exemptions package is still going on between the Government and mining companies aimed at removing some components and achieving a win-win situation in sector," he added
  According to the study named 'Informal Sector Taxation' conducted recently by an assistant research fellow with Economic and Social Research Foundation (ESRF), Mr Apronius Mbilinyi, the Government loses heavily from the informal sector.
  The study shows that revenues lost as income tax amounts to between 35 and 55 per cent of the total tax revenue.
  Sectors such as transport, real estate and consultancy are among those getting away without paying income tax.
   According to the opposition party Chadema, the Secretary General, Dr Wilibrod Slaa, the Government is loosing about Tsh700 billion (US$466.67 million) every month through exemptions.
  In 2008 the Government formed a special team to review the mining sector with a view to increasing its contribution to national economy.
  The IMF Executive Board has urged Tanzania to increase tax on mining activities in a drive to boost the country's revenue collection and hence its budgetary obligations.
  Bretton Woods institutions have encouraged Tanzania to expeditiously complete its debt management strategy and maintain a cautious approach to non-concessional borrowing to ensure debt sustainability over the medium term.
   However, the Minister for Finance and Economic Affairs, Mr Mustafa Mkulo said the country was still within acceptable levels of borrowing and that the same had been proved by a study by the IMF.
  Minister Mkulo told the East African Business Week that the Bretton Woods institutions were aware that the Government borrowed within acceptable terms and for development projects.
The Minister's position came following an IMF caution early this month that Tanzania could be borrowing for recurrent expenditures, warning that debt levels will rise rapidly.
  The Finance Minister said the, "Tanzania's national budget for financial year 2011/2012 is Tsh11.9 trillion ($7.93 billion), out of which Tsh7.3 trillion ($ 4.87 billion) is meant for recurrent votes, while Tsh4.5 trillion ($ 3 billion) is allocated for development programmes and projects.