Govt gives in to MPs’ 10 Budget demands

The government has made 10 changes in the 2012/13 Budget in a move that takes on board proposals that MPs gave during the debate on the revenue and expenditure plan tabled by Finance minister in Dodoma on June 14.

The Budget was approved by the august House last Friday, so the changes are to be included in the Finance Bill 2012 to be tabled in Parliament at the end of the session in August.

Eight of the changes concern the tax structure and would amount to increasing taxes for telecommunications companies, according to a speech by the Finance minister speech seen by The Citizen.

The other two changes involve banning the export of raw hides and skins as well as letting MPs approve the use of the compensation cash from the radar scandal.

The government has accepted proposals from the Shadow budget to tax assets of multinational corporations changing hands through mergers and acquisations.

In his Budget speech, minister for Finance William Mgimwa said in 2012/13, the government would tax multinationals when shareholding changes hands.

But the Shadow minister for Finance Zitto Kabwe proposed in his “alternative Budget” the imposition of capital gains tax of 30 per cent in the case of change of asset ownership. The government, however, said it would charge 15 per cent capital gains tax.

The government has also adopted a proposal from the opposition camp on raising more taxes from the telecommunications companies by working with the new facility procured by Tanzania Communications Regulatory Authority (TCRA) to monitor phone traffic.

“The exemptions extended to telecommunication companies especially on depreciation allowance is hereby removed,” reads part of Dr Mgimwa’s speech, a brief of which he read in Parliament on Friday.

He also said taxes on foreign companies providing services to mining, oil and gas firms would henceforth be different from those charged to local ones in the withholding tax. A local firm would be one with at least 51 per cent shares held by Tanzanians.

Imported edible oil would also be charged 10 per cent import duty in order to protect local industries. But the decision has to be ratified by other East African Community finance ministers.

In the financial year 2012/13, business firms owned by the government (parastatals) will start paying the skills development levy (SLD) as proposed by legislators. But the rate will be reduced from six per cent to a smaller rate to be announced at the tabling of the Finance Bill 2012 by Dr Mgimwa.

In their proposals, the Confederation of Tanzania Industries argued for a reduction of SDL to four per cent in the 2012/13 Budget and to two per cent in the 2013/14 Budget.

The Budget has also increased the threshold of presumptive charged to small businesses to Sh4 million of annual turnover from the Sh3 million Dr Mgimwa had proposed. The Shadow budget had proposed the removal of the tax on Sh3 million turnover but the government compromised by increasing the threshold to Sh4 million.

In the new changes, the government has also removed the Value Added Tax (VAT) on raw materials for textile firms.

Zero rating VAT on textile products was proposed by the Parliamentary Finance and Economic Committee as well as MPs from the Lake Zone.

The government has also reintroduced excise duty exemptions on car imports for legislators and government employees.  The government had proposed to remove the exemptions as part of efforts to increase the tax base but MPs resisted.

This has been viewed in some quarters as double standard by MPs who are have appeared to be up in arms against tax exemptions.

Experts say charging capital gains tax on assets of multinationals when they change hands would increase tax revenue.
Source: The Citizen 
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