CHECK OUT THE TANZANIA BUDGET

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SPEECH BY THE MINISTER FOR FINANCE AND ECONOMIC
AFFAIRS HON. MUSTAFA HAIDI MKULO (MP),
INTRODUCING TO THE NATIONAL ASSEMBLY THE
ESTIMATES OF GOVERNMENT REVENUE AND
EXPENDITURE FOR THE FINANCIAL YEAR 2010/ 2011
INTRODUCTION
1. Mr. Speaker, I beg to move that this esteemed House now resolve
to debate and approve Government proposals for Revenue and
Expenditure estimates for the Financial year 2010/11. Together
with this speech, there are four volumes of books, which provide
detailed explanation of the budget estimates. Volume one presents
revenue estimates; volumes two and three describe recurrent
expenditure for ministries, government departments, regions and
local government authorities; and volume four presents
development expenditure estimates for the ministries, government
departments, regions, and local government authorities. In
addition, there is Finance Bill for the year 2010, which is also part
of this budget.
2. Mr. Speaker, I would like to take this opportunity to state that,
the Budget for 2009/2010 marks the end of the first five-year
period of the Fourth Phase Government, which came into power in
December 2005. During this period, the Budget has been used as
an important instrument for the implementation of economic and
social development policies and objectives, in accordance with the
ruling party – CCM Election Manifesto. Therefore, the budget for
2010/11 financial year, is an extension to the implementation of
the economic and social objectives. During this period, there have
been satisfactory achievements in service delivery and
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strengthening of infrastructure in order to facilitate economic
growth and poverty reduction.
3. Mr Speaker, I would now like to express my sincere gratitude
to all those who, in one-way or another, participated in the
preparation of this budget. Preparation of the Government budget
involves many stakeholders and institutions. Specifically, I would
like to thank the Finance and Economic Affairs Parliamentary
Committee, under the Chairmanship of Honourable Dr Abdallah
Omari Kigoda (MP) and other committees for their constructive
scrutiny of the proposals for this budget. I would like to extend my
special thanks to the Office of the Attorney General for the timely
preparation of the 2010 Finance Bill and other legal documents
that are part of this budget.
4. Mr Speaker, I would also like to thank my colleagues at the
Ministry of Finance and Economic Affairs, particularly the Deputy
Ministers, Hon. Jeremiah S. Sumari (MP) and Hon. Omari Y.
Mzee (MP); the Permanent Secretary, Ramadhani M. Khijjah;
Deputy Permanent Secretaries, John M. Haule, Laston T.
Msongole and Dr. Servacius B. Likwelile; and the Executive
Secretary to the Planning Commission, Dr Philip I. Mpango.
Further, I would like to thank all Heads of Departments and staff
of the ministry of Finance and Economic Affairs for working
tirelessly to produce this budget in time. I am also indebted to the
Chief Government Printer for timely printing all budget
documents. Lastly, my sincere thanks go to experts and all who
made proposals regarding policy, strategies and tax related
measures, which, to a large extent, have been taken into account in
the preparation of this budget.
5. Mr Speaker, this is the last Budget Session of the first five years of
the Fourth Phase Government. Most of us will go back to our
constituencies to seek re-election in order to come back to this
esteemed House. It is my expectations that voters and the general
public will not forget the achievements made by the Honourable
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Members of Parliament of this House and the Fourth Phase
Government.
6. Mr Speaker, the Government continued to implement its
responsibilities in line with the National Development Vision
2025; National Strategy for Growth and Reduction of Poverty
(NSGRP/MKUKUTA; Millennium Development Goals; and the
CCM Election Manifesto of 2005. I would like to commend your
esteemed House, under your able leadership, for the valuable
contribution that enabled the Government to make remarkable
achievements during this period.
ACHIEVEMENTS AND CHALLENGES THAT THE FOURTH
PHASE GOVERNMENT FACED IN IMPLEMENTING THE
2009/10 BUDGET
7. Mr. Speaker, the following are some of the achievements by the
Government in the past five years:
• (1) Domestic revenue has increased by 121 percent from Tshs
2,124.8 billion in 2005/06, to Tshs 4,688.3 billion expected to be
collected in 2009/10. In other words, domestic revenue has more
than doubled from an average of Tshs 177 billion per month to an
average of more than Tshs 390 billion per month over the same
period. As percentage of GDP, domestic revenue increased from
12.5 percent to 16.4 percent over the same period. This was due
Government’s efforts in improving tax and non-tax revenue
administrations;
• (ii) Disbursement of General Budget Support grants and loans
increased from Tshs 588.702 billion in 2005/06 to Tshs 1,307.707
billion by end of-June 2009/10. At the same time, disbursement of
grants and loans for development projects increased from Tshs
1,047.266 billion to Tshs 2,825.431 billion over the same period.
This increase was partly attributed to the implementation of the
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Joint Assistance Strategy for Tanzania (JAST) and the cordial
relationship that exists between Tanzania and Development
partners.
• (iii) Government expenditure increased from Tshs 4,131.946
billion in 2005/06 to Tshs 9,238.801 billion by end-June 2010.
During the period, Government expenditure focused on the
implementation of the objectives of the National Development
Vision 2025, National Strategy for Growth and Reduction of
Poverty (NSGRP), Millennium Development Goals and
implementation of the CCM Election Manifesto of 2005.
• (iv) Commercial bans credit to the private sector for financing
various economic activities increased from Tshs 1,571.0 billion in
December 2005 to Tshs 4,836.0 billion on October 2009. The
increase is a result of prudent monetary policies;
• (v) National Debt has decreased from USD10.01 billion in the year
2005/06 to USD 8.25 billion in 2008/09 equivalent to a decline of
18 percent. According to debt sustainability analysis benchmarks,
the current level of National Debt is sustainable;
• (vi) During the period, the Government took measures to
rehabilitate and construct new economic infrastructure including
roads, energy and irrigation schemes. Measures taken to improve
education at all levels, including construction of secondary schools
in each ward, construction of the University of Dodoma and
upgrading of some colleges to universities status;
• (vii) The Economic Empowerment Fund has continued to assist
citizens economically by providing Tshs 10.5 billion I the first
phase to CRDB and NMB banks for on lending to small and
medium entrepreneurs. The Fund was replenished three times to
boost it to the tune of Tshs 31.5 billion. By December 2009, a total
of 66,559 entrepreneurs had benefited from loans provided by the
Fund. Out of the total beneficiaries, 42851 are men and 23,708 are
women. During the second phase of lending, the Government
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provided Tshs 10.5 billion out of which Tshs 600 million was
allocated to Zanzibar and the remaining Tshs 9.9 billion was
allocated to Mainland Tanzania. The Government also recognizes
and appreciates the important role played Non-governmental
organizations such as FINCA, Presidential Trust Fund (PTF),
PRIDE, VICOBA, etc in the provision of micro finance services;
• (viii) The Small Entrepreneurs Loan Facility (SELF) project
continued to provide microfinance services to small entrepreneurs.
In 2005, SELF provided loans amounting to shillings 5.6 billion.
By March 2010, shillings 25.1 billion worth of loans had been
delivered to beneficiaries. This is an in crease of about 348 per
cent. Also the number of microfinance institutions benefiting from
SELF loans increased from 175 in 2005 to 247 in March 2010,
equivalent to an increase of 72 institutions. Correspondingly, the
number of beneficiaries increased from 20,526 in 2005 to 69,795
in 2010, of which women are 58 percent.
• (ix) In December 2007, the Government established the
Mwananchi Empowerment Fund with a start-up capital of shillings
400 million. By December 2009, loans amounting shillings 4.2
billion had been disbursed to 4,437 entrepreneurs, including 1,341
women and 3,096 men; and
• (x) The Export Credit Guarantee Scheme and the Small and
Medium Entrepreneurs Credit Guarantee Scheme increased their
capital from Tshs 500 million in September 2005 to Tshs 5,751
million in March 2010. This strengthened capacity of the two
schemes to provide more loans to entrepreneurs through the
designated banks.
8. Mr. Speaker, despite the achievements I have cited above, the
government faced several budgetary challenges including the
following:
• (i) Inadequate domestic revenue to finance Government
programmes, particularly infrastructure projects such as
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railways, ports, roads, airports and irrigation; social services
(education, health and water; and agriculture;
• (ii) Existence of a large informal sector which is not
adequately integrated in the formal economy, hence
contributing minimally to domestic revenue;
• (iii) Slow pace of implementation of development projects
due to insufficient knowledge on public procurement
procedures as stipulated in the Public Procurement Act of
2004 and delays in the disbursement of funds for
development project; and
• (iv) The use of the Integrated Financial Management System
(IFMS) has not yet been rolled out to all Local Government
Councils in the country.
9. Mr. Speaker, in my speech on the economic Survey this
morning, I explained the trends in our economy since 2005/06 to date. I
also presented the medium-term target for the period 2010/11 – 2011/12.
I would like now to take this opportunity to review implementation of
the budget during the first nine months of 2009/10; and the likely
outturn to end June 2010. I will also explain the basis and objectives of
the budget for 2010/11.
REVIEW OF IMPLEMENTATION OF FISCAL POLICIES FOR
2009/10
10. Mr Speaker, fiscal policies for the year 2009/10 include policies
for domestic revenue, expenditure, grants and loans. Revenue policies
included measures to broaden the tax base strengthening
administrative procedures and controls in revenue collection,
reducing tax exemptions and increasing incentives in order to attract
local and foreign investors.
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11. Mr Speaker, expenditure policies focused on higher resource
allocation to priority sectors including Education, Infrastructure and
Agriculture. In addition expenditure policies entailed strengthening
the Public Financial Management System and expenditure tracking
including budget evaluation in order to ensure efficient use of
financial resources.
Budgetary measures were taken to mitigate the impact of the global
financial and economic crisis; allocate financial resources to special
programmes aimed at attracting and retaining staff in underserved
areas, improve service delivery and sustain achievements realized in
health, education and water sectors.
12. Mr Speaker, with special respect to foreign grants and loans, the
government planned to mobilize grants and concessional loans in
order to enhance Government capacity to finance big infrastructure
projects including involving the private sector.
13. Mr Speaker, taking into account the above policies, Government
planned to collect a total of Sh 9,513.685 billion from domestic
revenue, foreign grants and loans, domestic borrowing and revenue
from privatization. Correspondingly, Government estimated to spend
a total of Sh 9,513.685 billion. However, following the
Supplementary Budget that was approved by Parliament in February
2010, the revenue and expenditure increased by Sh 19 billion and
therefore the total budget reached Sh 9,532.685 billion.
DOMESTIC REVENUE
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14. Mr Speaker, Government estimates for domestic revenue in
2009/10 was Sh 5,096.016 billion (Sh 5.1 trillion) equivalent to 16.1
per cent of the GDP compared to 15.9 0f the GDP in 2008/09.
In order to ensure efficient collection of the estimated revenue,
several measures were taken including the following:
(i) Broadening of the tax base, reduction of tax exemptions, sustain
macroeconomic stability and improvement of the business
environment in order to promote the growth of the private
sector.
(ii) Effectively implement reforms in the Tanzania Revenue
Authority (TRA) as stipulated in the Third Five-Year
Corporate Plan, whose objectives include curbing tax evasion
to controlling revenue leakages; raising awareness on the
importance of paying taxes; and continuing to streamline the
methodology for business tax assessment;
(iii) Adjust the tax structure and strengthen the Large Tax Payers’
Department by improving the operational systems;
(iv) Strengthen supervision and operations in Customs and
Exercise Department by enhancing accountability and
application of technology in order to reduce inconveniences
to tax payers;
(v) Strengthen monitoring and tracking of movement of cargo
the port of Dar es Salaam to Inland Container Depts (ICD),
including the use of modern technology;
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(vi) Strengthen monitoring of fuel imports by ensuring full time
efficient operation of flow metres;
(vii) To ensure transit fuel is not sold in the domestic market.
(viii) Collaborate with respective authorities in controlling
adulteration of fuel with the aim of curbing tax evasion and
ensure quality of fuel with a view of safe guarding vehicles
and plants operated by diesel;
(ix) Establish a Fuel Bonded Ware House using TIPER facilities,
to facilitate bulk importation of fuel. This measure will
enable the country to have sufficient stock of fuel, curb tax
evasion and increase efficiency in the fuel market by
reducing costs of fuel imports and operations and hence
reduce prices to the final consumers.
(x) Improve field and desk tax audits, as well as strengthening
supervision in collection of tax arrears.
(xi) Improve supervision in the collection of property tax and tax
on rental incomes; and
(xii) Finalise review of procedures and identification of new
sources of non-tax revenue from Ministries, Regions, and
Independent Departments, with the objective of identifying
weaknesses and take remedial measures in increasing
efficiency in revenue collection.
15. Mr Speaker, during the year 2009/10, the Government amended
the Value Added Tax act CAP 148. The amendments included
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reducing the VAT rate from 20 per cent to 18 per cent, with the view
to encourage voluntary compliance in paying tax; imposing VAT on
mobile services on face value vouchers at source and not on
discounted value sold to wholesalers, and charging VAT on leased
houses and buildings. Also, the Government granted VAT exemption
on heat insulated milk cooling tanks and aluminium jerry cans, used
for storage and collection of milk in the dairy industry, in order to
improve the quality of milk and income of dairy farmers.
Furthermore, VAT exemption was also provided on strengthening
services on foreign vessels as well as on agricultural services including
land preparation; cultivation, planting and harvesting in order to
reduce production costs.
16. Mr Speaker, in 2009/10 budget, Government revised the Excise
(Tariff and management) Act by imposing excise duty on mobile
phones at the point of sale of scratch cards (credit vouchers) or
airtime at its full face value rather than the end of such use.
17. Mr Speaker, in compliance with the East African Community
(EAC) Protocol requirements, the EAC Ministers for Finance agreed
to make various amendments to the East Africa Community Customs
Act 2004 as was elaborated in my 2009/10 Budget speech.
18. Mr Speaker, during the July 2009 to March 2010 period, the
Government collected domestic revenue amounting to Sh 3,490.263
billion, equivalent to 91.3 per cent of estimates of Sh 3,821.397 billion
for the period. This trend represents a shortfall of Sh 331.133 billion,
compared to the target for the period. There was a shortfall in excise
duty collection due to the decrease in production of taxable products
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especially cigarettes, beers and soft drinks. There was also a short fall
in non-tax revenues.
19. Mr Speaker, VAT collection from local sales amounted to Sh
564.798 billion, equivalent to 90 per cent of the estimate for the
period. On the other hand collections of VAT on imports amounted
to Sh 556.643 billion, which is higher by 2 per cent above the target.
The Government targeted to collect Sh 314.251 billion on import
duty but collected 282.309 billion equivalent of to 90 per cent of the
target. Excise duty collection on locally manufactured products
amounted to 230.846 billion equivalent to 83 per cent of the target of
Sh 278.617 billion, while Sh 393.555 billion was collected from excise
duty on imported products which was 12 per cent below the target
of Sh 448.666 billion. Actual income tax collection amounted to Sh
1,039.887 billion equivalent of the target for the period of Sh1,
108.908 billion for the period.
20. Mr speaker, Collection of non-tax revenue by Ministries,
Departments and Regions amounted to Sh 160.243 billion, equivalent
to 80 per cent of the estimated amount of Sh 199.653. Also by March
2010 Government had collected Sh 9.659 billion from the sale of
NMB shares, compared to the target of Sh15 billion. The process of
selling the remaining shares through the Stock Exchange Market is
being worked on.
LOANS AND GRANTS
21. Mr Speaker, during the year 2009/10, the Government planned to
borrow Sh 506.193 billion equivalent to 1.6 per cent of the GDP from
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domestic sources, as one of the measures to ease the impact of the
global financial and economic crisis. By March 2010 Sh 155 billion
had been borrowed for that purpose.
In addition Government securities and bonds amounting to Sh
424.393 billion were sold in the domestic market in form of rollover
of maturing bonds and for liquidity management.
22. Mr. Speaker, during the period July 2009 to March 2010, total
grants and loans received as General Budget Support amounted to
Tshs 998.676 billion.
External grants and concessional loans for development projects and
programmes including Basket Funds amounted to Tshs 1,380.883
billion, equivalent to 93 percent of the estimate of the year.
EXPENDITURE
23. Mr. Speaker, in the financial year 2009/10, the government has
continued to align expenditures and policy objectives as outlined in
MKUKUTA, as the foundation to attain objectives of the
Development Vision 2025.
Areas of focus in resources allocation were education, agriculture and
health. Actual expenditure for the period of July 2009-March 2010
amounted to Tshs 6,718.713 billion. Recurrent expenditure was Tshs
4,189.721 billion. These expenditures were financed through
domestic revenue, foreign grants and loans as well a domestic loans.
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24. Mr. Speaker, the Government wage bill for the period of July
2009-March 2010 amounted to Tshs 1,276.706 billion, equivalent to
97 percent of the estimate of Tshs 1,320.908 billion. Interest
payments on domestic debt amounted to Tshs 145.914 billion,
equivalent to 62 percent of the estimate. Foreign interest payments
amounted to Tshs 27.681 billion, equivalent to 73 percent of the
estimate.
Expenditure on other debts servicing obligations (CFS) was Tshs
276.569 billion, equivalent to 81 percent of the estimate.
25. Mr. Speaker, other charges in all Ministries, Departments,
Agencies, Regions and Councils amounted to Tsh 2,462.851 billion,
equivalent to 97 percent of the estimate for the period.
The Government continued to use the cash budget system in the
release of funds during the period under review. Development
expenditure amounted to Tshs 1,954.197 billion, of which Tshs
1,328.814 billion were foreign funds. This level of expenditure was
equivalent to 75 per cent and 93 per cent of local and foreign funds
estimates respectively.
ISSUES RELATED TO LOCAL GOVERNMENT
26. Mr. Speaker, during 2009/10 the central government continued to
support local authorities trough the provision of subventions,
manpower, equipments and technical support on pertinent areas as
provided for in the budget. By March 2010, the local governments had
received a total of TShs 1,348.370 billion, equivalent to 65.9 per cent of
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the target of TShs 2,044.567 billion. With respect to human resource,
the government recruited 394 staff, of which 307 are accountants and
87 are internal auditors. In addition, 800 heads of departments from
local authorities were trained on budget preparation techniques in
order to enhance their budget execution capacities.
27. Mr. Speaker the local governments continued to collect revenue
from various local sources in accordance with chapter 290 of the local
government finance act. During 2009/10, revenue from local
governments was estimated at Tshs 138.052 billion. By March 2010,
actual revenue collection by local government amounted to Tshs
86.263 billion, equivalent to 62.5 per cent of the target.
28. Mr. Speaker, for some time now the central government has been
disbursing funds to the local authorities through numerous accounts,
which were opened for various purposes. This has led to a multitude of
unnecessary accounts leading to confusion and increased accounts. The
multitude of accounts has also increased the work‐load of the already
over‐stretched staff in managing the books of accounts, as well as
increasing operational costs of maintaining dormant accounts. In order
to improve cash management, the government will continue reducing
the number of accounts in local government to appropriate levels.
29. Mr. Speaker, according to the controller and auditor general’s
report some of the local government authorities were found to have
inappropriate expenditures that led to getting qualified or adverse
certificates. Likewise, a lot of funds disbursed to local governments
have been accumulating in bank accounts without being spent on time
for the intended purposes, and hence denying their people essential
services. Measures will be taken to address this problem.
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30. Mr. Speaker, the government continued to implement the
Integrated Financial Management System (IFMS). So far, 87 local
authorities have already been connected to the system. Efforts are
being made to connect the remaining authorities to the system.
31. Mr. Speaker, the government has established the Constituency
Development Fund as provided for by the Act number 6 of 2009, to
promote community based development initiatives. During 2009/10
the government started to allocate funds to implement this initiative, in
order to accelerate implementation of development projects at the
grass‐root level.
32. Mr. Speaker, in order to ensure that all funds disbursed to local
authorities are utilized for the intended purpose, the government
continued to strengthen the capacities of planning, accounting, and
internal audit departments. Essentially, these are the departments that
are responsible for accountability for expenditure, and instilling fiscal
discipline in the local authorities.
PUBLIC FINANCIAL MANAGEMENT
33. Mr. Speaker, the controller and auditor general’s audit report for
2008/2009 has shown substantial improvements in public financial
management in ministries and central government agencies along with
a decline in audit queries. The report also shows an increase in
unqualified audit reports for ministries and independent departments
from 70 percent in 2007/2008 to 86 percent in 2008/2009. I wish to
commend those ministries and departments with unqualified audit
reports. Despite the noted improvement, the government is aware of
weaknesses in the management of public funds in the local authorities.
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These weaknesses have also been cited in the Parliamentary Local
Authorities Accounts Committee (LAAC) Report.
34. Mr. Speaker, the controller and auditor general’s audit report for
2008/2009 identifies weaknesses in public financial management in the
following areas: non‐compliance to international standards in the
preparation of public accounts (IPSAS); non‐adherence to procurement
procedures and regulations; weak systems for control and management
of government assets and revenue collection; weak salary payment
systems; and non‐implementation of recommendations from the CAG’s
past reports. Measures are being undertaken to address these
weaknesses.
NATIONAL STRATERGY FOR GRWOTH AND REDUCTION OF POVERTY
(NSGRP)
35. Mr. Speaker, the government has completed the preparation of the
MKUKUTA II whose implementation will start in the financial year
2010/11. The preparation of MKUKUTA II is a result of studies and
numerous consultations with various stakeholders including Members
of Parliament, ministries, independent departments and agencies, non
government organizations, religious organizations, development
partners, TUCTA and the private sector. MKUKUTA II is built on results
based strategies organized around three clusters, namely growth and
reduction of income poverty, quality of life and social well‐being, and
governance and accountability. The emphasis and agenda of the next
strategy will be on growth and economic management, social services
delivery and strengthening coordination of its implementation.
36. Mr. Speaker, in the next five years, the government will allocate
funds for MKUKUTA II to finance few and important priorities that have
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potential for broad based economic growth and improved social
services. The private sector is expected to complement government
efforts through implementation of joint venture projects, including
public‐private partnership (PPP). MKUKUTA II priorities are based on
four pillars, including; (i) to develop and ensure efficient use of means
of production, including human resources, land and capital; (ii)
strengthening the economic management institutions; (ii) investing in
key economic infrastructure in particular electricity, water, roads,
railways, ports and airports; and (iv) strengthening of economic
management capacity of the government in facilitating the private
sector to participate in production and social service delivery.
THE 2009/10 BUDGET LIKELY OUT‐TURN TO JUNE, 2010
37. Mr. Speaker, the budget execution trends over the first nine
months to March 2010 suggest that revenue collection to June 2010
will fall short of the planed target. Domestic revenue is expected to
amount to Tshs 4,688.335 billion (4.7 trillion), which is below target by
8 percent, or Tshs 407.681 billion. Some development partners have
front loaded grants and loans projected for fiscal year 2010/11 to
support government efforts in mitigating the adverse impact of the
global financial and economic crisis. By end‐June 2010, disbursement of
the General Budget Support is expected to amount to Tshs 1,307.707
billion, compared to the budgeted target of Tshs 1,193.91 billion. This
additional funding has helped to bridge shortfall domestic revenue.
Disbursement of grants and loans for the implementation of projects is
expected to be on target. The government will proceed with plans to
raise funds from the domestic market to finance essential expenditure
and maturing government securities. On the expenditure side, the
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government has taken measures to align expenditure with expected
revenue collection.
THE BASIS AND OBJECTIVES OF THE 2010/11 BUDGET
38. Mr. Speaker, the 2010/11 budget takes into account the objectives
for the National Development Vision 2025, MKUKUTA II, the
Millennium Development goals, the National Debt Strategy and
priorities outlined in the budget guidelines 2010/11‐2012/13. The
budget also takes due account of the objectives of the Joint Assistance
Strategy for Tanzania (JAST). The basis and objectives of the 2010/11
budget are:
(i) Improvement of the tax administration system, including
identification of new sources of revenue;
(ii) Strengthening management and control of revenue collection from
various sources;
(iii) Reduction of tax exemptions in order to increase revenue
collection;
(iv) Allocation of financial resources for the implementation of Kilimo
Kwanza;
(v) Acceleration of the process of introducing National Identity Cards;
(vi) To allocate more funds for MKUKUTA II implementation;
(vii) Allocate funds the ministry of Lands and Human Settlements for
land survey and land use planning;
(viii) Protecting achievements in education and health sectors;
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(ix) Allocate funds for 2012 Population and human settlement census;
(x) Strengthening good governance and accountability;
(xi) Improve remuneration for civil servants and employment creation;
(xii) Allocate sufficient funds for facilitating the October 2010 General
Election;
(xiii) Continue improving conducive environment for attracting local
and foreign investment;
(xiv) Improve and expand essential infrastructure services, including
roads, railways, ports, airports and electricity projects;
(xv) Harmonise monetary and fiscal policies in order to control inflation
and interest rates and enhance access to credit by the private sector;
(xvi) Strengthening the local government authorities to manage
financial and human resources for efficient implementation of the
decentralization by devolution (D by D) policy; and
(xvii) Mobilise both concessional and commercial loans in order to
enable the government finance large infrastructure projects including
involving the private sector though the Public Private arrangement.
REVENUE POLICIES
39. Mr. Speaker, in the year 2010/11 the government plans to collect
domestic revenue amounting to Tshs 6,003.59 billion equivalent to 17.3
per cent of GDP, compared with 16.4 per cent of GDP in financial year
2009/10. Out of this amount, Tshs 5,652.59 billion is tax revenue and
351.0 billion is non‐tax revenue. Revenue collection from local
government authorities is estimated at Tshs 172.582 billion. In addition,
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the government expects to raise Tshs 30.0 billion through selling some
of its shares in the NBC Limited.
40. Mr. Speaker, the government will continue to implement measures
to strengthen domestic revenue collection in order to be able to
finance most of recurrent expenditures. These measures include:
(i) Strengthening systems for tax collection, and where possible use of
banking system for tax collection;
(ii) Put in place a strategy to improve services in the tourism
industry, in particular grading hotels in accordance with
international standards, with a view to increase revenue
collection from fees;
(iii) Enforce the implementation of the Finance Act that directs
parastatals and other public institutions to remit to the Treasury,
surplus funds generated from their operations;
(iv) Widening the tax base by registering new tax payers and
sustaining macroeconomic stability along with efforts to
improve the business environment that will support growth of
the private sector;
(v) Monitor closely the implementation of TRA’s Third Five
Year Corporate Plan, which has been the basis for increased tax
revenue collection;
(vi) Implement measures to increase collection of non-tax revenue
by Government Ministries and Departments;
(vii) Review procedures for tax exemptions with a view to strengthen
controls; and
(viii) Enhanced capacity building of Local Authorities through
allocation of adequate manpower in order to strengthen
assessment and collection of revenue in Local Authorities.
NEW GRANTS AND CONCESSIONAL LOANS
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41: Mr. Speaker, grants and concessional loans from Development
Partners will continue to form a major source of Government revenue.
During year 2010/2011 the Government plans to mobilize Tshs 821,645
billion as General Budget Support, compared to Tshs. 1,307,707 billion
expected to be received by the end of this year. The decline in GBS
grants and loans is due to the fact that some Development Partners
disbursed in 2009/10 resources that were planned for the financial year
2010/11 to support Government initiatives in mitigating the adverse
impact of global financial and economic crisis. Furthermore, the
Government plans to mobilize from Development Partners grants and
loans worth Tshs 2,452,908 billion for financing development projects
and programmes.
42. Mr. Speaker, I would like to mention before your esteemed House
our Development Partners who have been providing substantial support
in our development efforts. As follows; United Kingdom, Denmark,
Netherlands, Belgium, Canada, China, Finland, France, Germany,
Ireland, Italy, Japan, Korea, Kuwait, Norway, Spain, Sweden,
Switzerland, United States of America, World Bank, Africa
Development Bank, BADEA, European Union, Global Funds, IMF,
Kuwait Fund, Nordic Fund, OPEC Fund, Saudi Fund and United
Nations. I wish to thank them all for their valuable support.
43. Mr. Speaker, the Government will continue to mobilize grants and
concessional loans to finance development programmes. However,
beginning next financial year (2010/11), the Government will also start
using commercial loans for the purpose of financing the development
budget. In view of the huge financial requirements of infrastructure
projects, the Government intends to borrow Tshs 1,331.2 billion from
both domestic and external financial markets to finance such projects. In
addition, Tshs 797.6 billion will be mobilized to finance maturing
government securities. I would like to emphasise that commercial loans
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are only intended for financing priority infrastructure projects. The
Government will not use commercial loans to finance recurrent
expenditures. The decision to raise commercial loans will take into
account the need for maintaining macroeconomic stability and continued
availability of affordable credit to the private sector. This decision also
takes into account the need for maintaining sustainable levels of public
debt.
ECONOMIC EMPOWERMENT
44. Mr. Speaker, during the financial year 2010/11, the Government will
continue coordinating the implementation of the National Economic
Empowerment Policy, including promoting the establishment and
strengthening of SACCOS a viable vehicle for assess to concessional
loans to small entrepreneurs; especially women and the youth harmonize
training for enhancing entrepreneurial skills.
LOCAL GOVERNMENT ISSUES
45. Mr. Speaker, in financial year 2010/2011, Local Government
Authorities are expected to collect revenues amounting to Tshs 172.582
billion, which is equal to 2.9 percent of total domestic revenue collected
by the Central Government. This amount is small compared to the
available potential revenue opportunities in the Local Authorities. In the
next financial year, the Government will continue to strengthen the
capacity to Local Authorities in identifying new revenue sources and
improve efficiency in revenue collection from existing sources. The
Government also plans to revise the Local Government Finance Act in
order to broaden the tax base and set benchmarks for recurrent and
development expenditures. In addition, the Government will assist in
training on Tax assessment and collection for the pertinent staff in order
to enhance their capacities.
23
46. Mr. Speaker, in order to ensure that funds disbursed to Local
Authorities are spent for intended purposes, the Government will
empower and strengthen the departments of planning, accounts and
internal audit, with a view to increase accountability and management of
public funds in all Local Authorities.
EXPENDITURE POLICY
47. Mr. Speaker, during the financial year 2010/2011, Government
expenditure policies will focus on improving the management of public
funds; increasing efficiency in the use and management of public funds
with particular emphasis on areas that have potential for accelerating
economic growth and reduction of income poverty. In recognition of the
importance of the forthcoming General Elections which will be held in
October 2010, the Government has allocated sufficient funds to ensure
that the General Elections are held as planned.
Alignment of the Plan and Budget
48. Mr. Speaker, in order to ensure effective plans and discipline in the
execution of the budget, there is a need to strengthen alignment of the
Medium Term Plan and the budget. This will ensure effective use of
public resources. Furthermore, in order to speed up implementation of
the Development Vision 2025, the Government, through the Planning
Commission will start to prepare five year Medium Term Plans (MTPs).
PRIORITIES FOR THE 2010/2011 BUDGET
49. Mr. Speaker, priority areas in the budget for 2010/11 take into
account expenditure policies which I have explained above. The
Government will pay special attention to the October 2010 General
Elections to ensure that they take place as scheduled. The Government
will ensure that achievements realized in social services (education,
health and water) are sustained. Other priorities areas include agriculture
24
and livestock development, industries, water and irrigation, research and
development, infrastructure including roads, railway, ports, airports and
energy; and implementation of the decentralization by devolution policy.
In summary, the areas involved include:
(i) Modernize agriculture to realize high productivity through
supporting production of high quality seeds; provision of
subsidy on farm inputs; improving market information system
for farmers; developing marketing infrastructures; and
promoting value addition activities on agricultural products;
(ii) Strengthening extension services and research on production
of better livestock breeds with high productivity; and improving
provision of subsidies on veterinary drugs and vaccination;
(iii) Strengthening and developing irrigation schemes, in order to
attain the aspirations of Kilimo Kwanza, including construction
of rain water harvesting dams to increase irrigation capacity;
(iv) To increase of water supply in urban and rural areas;
(v) To establish national centres for land surveys and mapping
and implementation of national land use plans;
(vi) To accelerate implementation of the national identity card
project;
(vii) To protect and sustain achievements attained in education and
health sectors;
(viii) To allocate more resources for construction and rehabilitation of
transport infrastructure, especially roads and railways; to
strengthen road infrastructure in Dar es Salaam City in order to
reduce traffic congestion; rehabilitation of airports in order to
25
make Tanzania a regional and international commercial hub for
air transport services;
(ix) Enhanced impetus in the production of energy and
implementation of various projects in collaboration with the
private sector in order to increase energy generation and
distribution capacities in urban and rural areas;
(x) To promote small and medium scale businesses in order to
increase quality and value addition by investing in agroprocessing
industries, storage facilities and incubator sites;
promotion of the use appropriate industrial technologies that
conserve the environment, including production of farm
implements; and
(xi) To establish the Agricultural Bank, strengthening the Tanzania
Investment Bank and the Tanzania Women Bank and accelerate
the implementation of agricultural financial leasing services and
completes the establishment of the Tanzania Mortgage
Refinance Company (TMRC).
50. Mr. Speaker, on the basis of the above priorities, the sectoral
allocation of the 2010/11 budget is summarized as follows:
(i) Infrastructure has been allocated Tshs 1,505.1 billion, compared
to Tshs 1,096.6 billion in 2009/10. This represents an increase
of 37.3 percent;
(ii) Agriculture has been allocated Tshs 903.8 billion, compared to
Tshs 666.9 billion in 2009/10. This represents an increase of 35.5
percent;
(iii) Education has been allocated Tshs 2,045.3 billion compared to Tshs
1,743.9 billion in 2009/10. This represents an increase of 17.2 percent;
26
(iv) Health has been allocated Tshs 1,205.9 billion compared to
Tsh963.0 billion in 2009/10. This represents an increase of 25.2
percent;
(v) Water has been allocated Tshs 397.6 billion compared to Tshs 347.3
billion in 2009/10. This represents an increase of 14.5 percent;
(vi) Energy has been allocated Tshs 327.2 billion compared to Tsh 285.5
billion in 2009/10. This represents an increase of 14.6 percent; and
(vii) Tshs 30 billion has been allocated for research and monitoring.
Priority will be on rehabilitation of infrastructure in various research
institutions. During the year, the Government intends to prepare a
National Strategic Research Agenda. The objective is to identify few
research areas that can give useful results in a short period, at
affordable costs.
CONTROL OF PUBLIC EXPENDITURE
51. Mr Speaker, in order to improve management and control of public
expenditure, the Government intends to implement the following
measures;
(i) To curb misuse of telephone and electricity;
In recent years the Government has been spending huge amounts of
money to pay telephone and electricity bills for Ministries, Independent
Departments, Regions and Local Authorities. In the next fiscal year, the
Government, in collaboration with the telephone and electricity
companies (TTCL and TANESCO) has decided to adopt a prepaid service
delivery systems for all Ministries, Independent Departments, Regions
and Local Authorities offices in order to control accumulation of
27
payment arrears. This measure is intended to improve the revenues of
the two utility companies; and
(ii) Control of procurement and use of Government motor vehicles:
During the fiscal year 2010/11, the Government plans to reduce
procurement of new vehicles. The Government will also take measures
to strengthen the capacity of the Government Procurement Service
Agency (GPSA) to better coordinate procurement of Government
vehicles, including identification of type of vehicles to be procured in
order to reduce the cost of procurement, running and maintenance.
52. Mr Speaker, other measures that will be implemented during the
next fiscal year include the following;
(i) The Government plans to pay a fixed amount for house allowances
to eligible public servants, instead of percentage of the basic salary, as
it is the case now;
(ii) Substantial reduction and control of expenditure on allowances in
Ministries, Independent Departments, Regions and Local Authorities in
order to reduce unnecessary expenditure;
(iii) Ensure that the Integrated Financial Management System (IFMS) is
rolled out to the remaining Local Authorities with a view to ensuring
prudent use of public funds;
(iv) Provide training to accountants and internal auditors on
preparation of accounts according to international standards (IPSAS);
(V) Commencing the financial year 2010/11, Councils will be required to
show balances in their accounts at the end of each financial year, in
28
order to carry forward such balances to the following financial year as
sources of income;
(vi) Commencing 2010/11, the Government will start using the interbank
settlement system (TISS) administered by the Bank of Tanzania for
payments made by all Ministries in Dar es Salaam and region
administration in order to speed‐up payment transactions. Appropriate
safeguards have been put in place to protect the system;
(vii) Control the issuance of Government guarantees for loans to
various public institutions, in order to prevent unsustainable increases
in public debt; and
(viii) Establish a specialized body that will supervise the r construction
and enforce standards that will be set for Government buildings.
53. Mr Speaker, in order to strengthen public financial management,
the Government has made several amendments to Article 348 of the
Public Finance Act. The amendments will be presented to Parliament
during this Session. These amendments are intended to empower the
Treasury, through the Accountant General, to control the use of public
funds in the Local Authorities. Moreover, amendments will allow
establishment of the Internal Audit General Department, in order to
strengthen internal auditing in Ministies, Departments and Local
Authorities. The Internal Auditor General will be accountable to the
Paymaster General (PMG). In addition to internal auditing, the
Department will also involve technical auditors and stock verifiers to
ensure that the Government gets the value for the money spent.
54. Mr Speaker, the Government will continue to strengthen internal
auditing through training, monitoring through expenditure tracking,
including regular verification of the payroll in order to eliminate ghost
29
workers. In addition, the Government will continue to strengthen the
Integrated Financial Management System (IFMS) at all Government
levels in order to control expenditure and curb the accumulation of the
arrears. Moreover, the Government will establish a project database
which will be linked to the IFMS to facilitate monitoring of the flow of
funds to projects.
EMPLOYEES’ WELFARE
55. Mr Speaker, the Government is aware of the importance of the
employees’ welfare in improving efficiency and productivity. During
fiscal year 2010/11, the Government will take further measures in
improving the employees’ welfare. Alongside this measure, the
Government will continue the verification of the payroll in order to
eliminate payment to ghost workers.
MANAGEMENT OF PUBLIC ENTREPRISES
56. Mr Speaker, in recent years, a number of challenges related to
management of public corporations have emerged. Some of the public
corporations and institutions have failed to sustain themselves and
hence turning into huge burdens to the Government, as they continue
surviving on Government subsidies, contrary to objectives for which
they were established.
57. Mr Speaker, the Government has been taking measures to
strengthen management of public corporations and institutions with a
view to improve efficiency, productivity, and their revenues in order to
reduce their dependency on Government subsidies. During the 19th
Parliamentary Session in April, 2010, the Parliament passed
amendments to the Public Enterprises Act, CAP 257 and CAP.370 of the
Act that established the Treasury Registrar’s Office. The amendments
30
are aimed at empowering the Treasury Registrar’s Office to be an
autonomous authority with the mandate to oversee management and
operations of public corporations and institutions. In line with these
amendments, the structure of the Treasury Registrar’s Office will be
reviewed in order to facilitate it appropriately in assuming its mandate.
The Government will also evaluate public corporations and institutions
in order to identify challenges that need to be addressed.
REFORM OF THE TAX STRUCTURE, FEES AND OTHER REVENUE
MEASURES:
58. Mr Speaker, the Government will continue to broaden tax base and
strengthen domestic revenue collections to finance major portion of
expenditure. The Government will review tax laws that grant
exemptions with a view of controlling and instituting measures to
improve its supervision. Tanzania Revenue Authority (TRA) will monitor
closely implementation of its third five years Corporate Plan for the
period of (2008/09‐2012/13) which has been the basis and catalyst for
growth of domestic revenue. Likewise, the government will improve
administration and collection of Non Tax revenue to contribute in the
National Income.
59. Mr Speaker, The proposed measures will cover the following tax
laws;
(a) The Value Added Tax Act, CAP 148;
(b) The Income Tax Act, CAP 332;
(c) The Excise (Management &Tariff) Act, CAP 147;
(d) Local Government Finance Act, CAP 290;
31
(e) The Motor Vehicles (Tax On Registration and Transfer) Act CAP 124;
(f) Road Traffic Act, CAP 168;
(g) Cashewnut Industry Act, CAP 203;
(h) The Gaming Act, CAP 41;
(i) The East African Community Customs Management Act, 2004;
(j) Tax Laws and Government Notices (GNs) granting exemptions on
motor vehicles; and
(k) Minor Amendments in various Tax Laws;
(l) Amendments of the Fees and Levies Charged by Ministries, Regions
and Independent Departments.
A. The Value Added Tax Act;
60. Mr Speaker, Following the government decision to give first priority
to the Agricultural sector development under “KILIMO KWANZA,” I
propose to make the following amendments to the Value Added Tax
Act;
(i) Exempt VAT on transportation (intra‐transport) of agricultural
products i.e transportation of sugar cane, sisal and tea plantations from
the farm to the processing industry. This will apply to organized farming
only;
(ii) Exempt VAT on machines and equipments used in the collection,
transportation and processing of milk products. This measure is aimed
at promoting investment in the diary sub‐sector and improve the
income of livestock keepers. Machines and Equipments which are
proposed for exemptions are as follows:‐
32
(a) Milk Cans (HS Code.7310.29.90);
(b) Milk Pumps (HS Code no. 8413.81.00);
(c) Milk hoses (HS Code no. 8413.70.20);
(d) Compressor used in refrigerating equipment (HS Code
8414.30.00);
(e) Milk Storage tanks (HS code 7309.00.00);
(f) Milk tankers (HS Code 8716.31.90);
(g) Milk pasteurisers (HS Code 8434.20.00);
(h) Butter churns (HS Code 8434.90.00);
(i) Storage chillers (HS code 8415.81.00);
(j) Cheese presser (HS Code 8434.20.00).
(iii) Exempt VAT on animal feeds or seed cake (locally known as
Mashudu). The measure is intended to improve the livestock keeping
and enable the oil seed farmers to receive better prices for their
products,;
(iv) Provide VAT Special relief for the supply of equipments to a
registered Veterinary Practitioner under the Third Schedule to the VAT
Act;
(v) Exempt VAT on agricultural implements i.e. combine harvesters,
pick‐up balers, hay making machinery and the mowers used in
agricultural production and livestock;
(vi) Exempt VAT on Airfreight charges for transportation of flowers. The
measure is aimed at promoting horticulture farming;
33
(vii) Granting VAT special relief on “green houses” by adding a new item
under the Third Schedule to the VAT Act, to read “importation by or
supply of green houses to growers”. The measure is also intended to
boost horticulture farming;
(viii) Grant VAT special relief to the supply of goods and services to the
organised farms and farms under the registered cooperatives unions
for the purpose of building of farms infrastructures in the farms, such
as irrigation canals, construction of road networks, construction of
godowns and similar storage facilities; and
(ix) Exempt VAT on Breeding services through artificial animal
insemination.
61. Mr Speaker, I propose to make other amendments in the VAT Act
with a view to promote investment and enhance productivity in the
Industrial sector as follows:
(i) Provide for VAT special relief to the supply of building materials
and construction services to EPZ developers;
(ii) Zero rate VAT on locally produced edible oil using local oil seeds
by local processors;
34
(iii) Exempt VAT on supply of packaging materials for fruit juices
and milk products. The measure is intended to reduce
production costs and improve the quality of goods produced by
local processors; and
(iv) Reinstate the practice of classifying certain goods intended for
use in specific investments as “deemed capital goods” to
provide tax relief to investors. However, to avoid abuse of this
facility, the government will form a Technical committee (Inter
disciplinary committee) under Tanzania Revenue Authority to
oversee its implementation. A list of goods involved will be
prepared and made available to the beneficiaries.
The VAT measures together will reduce Government revenue by
Shs2.391 billion.
B. The Income Tax Act;
62. Mr. Speaker, I propose to make the following amendments to
the Income Tax Act, Cap 332:‐
(i) Amend section 11 of the Income Tax Act CAP 332 to introduce
Ring fencing within the mining areas. The measure will restrict
companies to utilise losses of one mine against the taxable
income of another mine while determining tax liabilities. This
measure will ensure that each mine is taxed separately and will
apply to all mining companies;
35
(ii) Reduce Individual Income Tax rate from 15 per cent to 14 per cent
for employees, this is in conjunction with the increment of the
minimum wage to be announced by the Minister of State,
President’s Office, Public Service Management. The measure is
intended to reduce the tax burden to the lower income
earners; and
(iii) Extend the application of withholding taxes on goods and
services to non‐TIN holders supplying goods and services to all
taxpayers. The measure is to encourage voluntary registration
of TIN and capture transactions made outside the tax net as
currently some business transactions takes place between non‐
TIN and TIN holders in private sector.
The Income tax measures together will reduce Government
revenues by Shs4.468 billion.
C. The Excise (Management & Tariff) Act;
63. Mr. Speaker, I propose to make the following amendments in
the Excise (Management & Tariff) Act:
(i) Reduce excise duty rate on HFO from Shillings 97 to Shillings 80
with a view to reducing industrial production coasts. The
measure conforms to the government’s intention to promote
industrial growth, create employment and generate revenue.
This reduction is in line with the decision reached between the
government and stakeholders in the industrial sector to reduce
36
it in phases and subsequently eliminate the whole duty within
three years;
(ii) Adjust the specific excise duty rates by 8 per cent on nonpetroleum
products. The adjustment considers the average
inflation rate for the period. The current and proposed rates
are as follows:‐
(a) Carbonated soft drinks from the current rate of Shillings 58
per litre to Shillings 63 per litre;
(b) Beer made from local un‐malted cereals from the
current rate of Shillings 209 per litre to Shillings 226 per
litre;
(c) Other beers from the current rate of Shillings 354 per litre to
Shillings 382 per litre;
(d) Wine produced with more than 25 per cent imported
grapes, from the current rate of Shillings 1,132 to Shillings
1,223 per litre; and
(e) Spirits from the current rate of Shilling 1,678 per litre to
Shillings 1,812 per litre.
(iii) The Excise Duty rates on Cigarettes are amended as follows:‐
(a) Cigarettes without filter tip and containing domestic tobacco
more that 75 per cent, from the current rate of Shillings
5,749 to Shillings 6,209 per thousand cigarettes.
(b) Cigarettes with filer tip and containing domestic
tobacco more than 75 per cent, from the current rate of
Shillings 13,564 to Shillings 14,649 per mil;
(c) Other cigarettes not mentioned in (a) and (b) from the
current rate of Shillings 24,633 to Shillings 26,604 per mil;
(d) Cut rag or cut filler from the current rate of Shillings
12,441 per kilogram to Shillings 13,436 per kilogram; and
(e) The excise duty rate on “Cigars” remains at 30 per cent.
37
The excise duty measures together are expected to increase
Government revenue by Shs20.042 billion.
D. Local Government Finance Act:
64. Mr. Speaker, I propose to effect the following amendments
under the Local Government Finance Act.
(i) Exempt Old persons from above 60 years and disabled persons
who have no reliable source of income, from payment of
Property tax. However, exemptions will only cover one
residential building. Approval for exemption shall be subject to
Local Government Authority’s recommendations on the status
of an applicant; and
(ii) Review produce Cess chargeable on agricultural products to be
charged between 3 per cent and 5 per cent of farm gate price,
this measure allows the Local Government Authorities to
impose rates based on the available resources.
E. The Motor Vehicle (Tax on Registration and Transfer) Act
65. Mr. Speaker, I propose to review motor vehicle/cycle registration
fees as follows:
(i) Motor vehicle from Shillings 120,000 to Shillings 150,000
(ii) Motor cycle from Shillings 35,000 to Shilling 45,000
The motor vehicle/cycle registration together will increase Government
revenue by Shs 3.19 billion.
38
F. Road Tariff Act;
66. Mr. Speaker, I propose to review the annual motor vehicle license
fee as follows:
(i) Motor vehicle with 0‐500.cc from Shillings 30,000 to Shillings
50,000;
(ii) Motor vehicle with 501‐1500.cc from Shillings 50,000 to Shillings
100,000;
(iii) Motor vehicle with 1501‐2500.cc from Shillings 100,000 to
Shillings 150,000; and
(iv) Motor vehicles with 2501.cc and more from Shillings 150,000
to Shillings 200,000.
The Annual Motor Vehicle License fees together will increase
Government revenue by Shs.16.981 billion.
G. Cashewnut Industry Act;
67. Mr. Speaker, I propose to increase levy on raw cashew nuts
from 10 per cent to 15 per cent of Free on Board (FOB) value or USD
160/MT whichever is higher. The measure is aimed at encouraging
value addition, reviving cashew nut processing factories which closed
39
business and creating local employment both in cashew farms and
factories.
The Cashew nut measures are expected to increase Government
revenue by Shs.2.613 billion.
H. The Gaming Act;
68. Mr. Speaker, I propose to increase Gaming tax on slot
machines from Shs.16,000 to Shs.32, 000 and impose gaming tax on
“forty machines site” at the rate 13 percent of gross gaming revenue.
The Gaming measures are expected to increase government revenue by
Shs. 0.5 billion.
1. The East African Community Common External Tariff (CET) and
Customs Management Act, 2004
69. Mr. Speaker, Ministers for Finance from EAC Partner States held
the meeting of Pre‐budget consultations on 12 May, 2010 in
Kampala, Uganda. The Ministers discussed proposals for reviewing of
the Common External Tariff rates submitted by the Partner States;
Tanzania, Kenya, Uganda and Rwanda. The review has taken into
account the requirement under the Protocol for the establishment of
40
the Customs Union that the Common External Tariff structure be
reviewed after five years.
70. Mr Speaker, Ministers for Finance recognizing that there is n EAC
Common Market, they agreed to implement policy measures to
promote growth of the important sectors like industries, agriculture
and transport. These sectors play a crucial role in supporting
economic growth in the region through their forward and backward
linkages with other sectors of the economy. With respect to the
industrial sector, the Ministers agreed to undertake the following
measures:‐
(i) Review the CET rate applicable on bare aluminium
conductors and cables under HS Code 7614.10.00 and HS
Code 7614.90.00 from 10% to 25% to protect producers in
the region against unfair competition from imported like
products;
(ii) Review the CET rate applicable on other cables of copper
wire under HS Code 7413.00.90 from 10% to 25%, the
measure is intended to harmonize with cables under HS
Code 7413.00.10 attracting the CET rate of 25% and are
competing products;
(iii) Grant duty remission to the specific inputs which attract
duty and are used in production of duty free finished
products. The measure is intended to create environment of
fair competition because some of inputs attract CET rate of
10% or 25%. To enjoy duty remission, EAC Partner States are
required to submit a list of specific inputs to the Secretariat
for implementation. In line with the agreed measure, the
41
local manufacturers in Tanzania are required to submit a list
of the inputs to the Ministry of Industry, Trade and
Marketing for submission to the EAC Secretariat;
(iv) Review the CET rate applicable on driers under HS Code
3211.00.00 from 10% to 0%;
(v) Review the CET rate applicable on Petroleum coke, not
calcined under HS Code 2713.11.00 from 10% to 0%;
(vi) Review the CET rate applicable on Stamping foils under HS
Code 3212.10.00 from 10% to 0%;
(vii) Review the CET rate applicable on Pigments dispersed in non
aqueous media, in liquid or paste form, of a kind used in the
manufacture of paints under HS Code 3212.90.10 from 10%
to 0%;
(viii) Grant duty remission on textile coated with gum used in
manufacturing of outer book covers under HS Code
5901.10.00;
(ix) Grant duty remission on looped pile fabrics of gum boot
manufacturing under HS Code 6001.22.00;
(x) Review the CET rate applicable on Flat – rolled products of
iron or non alloy steel coated or plated with tin of a
thickness of 0.5 mm or more under HS Code 7210.11.00
from 25% to 0%;
(xi) Review the CET rate applicable on Flat–rolled products of
iron and/or non alloy steel, of width of less than 600 mm
under HS Code 7212.10.00 from 10% to 0%; and
(xii) Extend the stay of application of CET rate of 35% on wheat
grain under HS Code 1001.90.20 and HS Code 1001.90.90
and apply the CET rate of 10% for one year because
production of wheat grain in the region does not satisfy the
market demand.
71. Mr Speaker, as explained earlier, the EAC Ministers for Finance
have also agreed to take measures to support the transport sector
42
with a view to reducing transportation costs and stimulate economic
growth. The Ministers agreed to implement the following measures:‐
(i) Extend the stay of application of CET rate of 25% and
apply CET rate of 10% on trucks of carrying capacity of 5
tones under HS Code 8704.22.90 for one year;
(ii) Extend the remission of import duty on trucks of carrying
capacity of over 20 tones under HS Code 8704.23.90 from
25% to 0% for one year;
(iii) Extend the exemption of import duty on buses under HS
Codes 8702.10.99 and 8702.90.99 to be imported in
Tanzania under the Dar ES Salaam Fast Truck Bus project
for one year. The measure is intended to improve the
safety of public transport by reducing congestion and
traffic jams and facilitates economic activities. The
Government is currently undertaking rehabilitation and
expansion of roads and related infrastructures in the city
in order to ensure that, the project starts as soon as
possible;
(iv) Grant duty remission to Motor Vehicles Assemblers, and
(v) Exempt import duty on tractors under HS Code
8701.20.90 to apply the CET rate of 0%.
72. Mr Speaker, measures taken to support agriculture and other
sectors involved the review of the tariff rates and amendments of
the EAC Customs Management Act, 2004 as follows:‐
(i) Amend item 25 of Part B of the EAC Customs
Management Act (CMA) 2004 to include under the
43
exemption regime lamps/bulbs made using LED
technology imported into the region in order to save
usage of electricity;
(ii) Amend the 5th Schedule of the EAC Customs Management
Act (CMA) 2004 under Part B (15) in order to include
parent stocks as an input for agriculture. The measures is
intended to promote investments in the poultry industry
in the country;
(iii) Extend the exemption regime granted to Armed Forces
Canteen (AFCO) for one year;
(iv) Amend Part B of the 5th Schedule of the EAC CMA 2004 to
review the exemption of the import duty granted on
importation of motor vehicles to returning residents in
order to limit the period to four (4) years before the
beneficiary can enjoy another exemption granted to
returning residents from abroad;
(v) Extend the application of CET rate of 25% on imported
cement under HS Code 2523.29.00 fro one year. A study
will be done on production capacity, demand and price
competitiveness so as to enable the Minister for Finance
to determine the appropriate CET rate on the product;
(vi) Extend the application of CET rate of 35% or US$ 0.20 per
Kg on worn out clothes under HS Code 6309.00.00.
Furthermore, the EAC Partner States agreed to prohibit
the importation of used undergarments in the region.
(vii) Review the CET rate applicable on Gas cookers and other
cookers of dual power sources under HS Code 7321.11.00
from 25% to 10%; and
(viii) Amend Part B of the 5th Schedule of the EAC CMA 2004
under the exemption regime.
44
The amendment of EAC CMA, 2004 and the review EAC Common
External Tariff will reduce the Government revenue by shillings 4.175
billion
J. Tax Laws and Government Notices (GNs) Granting Exemption on
Motor Vehicles
73. Mr Speaker, I propose to abolish tax exemptions on motor
vehicles aged more than 10 years. The measure is intended to
discourage importation of obsolete vehicles and preserve/protect
environment.
K. Minor amendments in various Tax Laws
74. Mr Speaker, I recommend other minor non‐fiscal amendments
in tax laws in order to facilitate proper execution and administration of
respective laws.
L. Amendments of the Fees and Levies Charged by Ministries, Regions
and Independent Departments
75. Mr Speaker, I recommend to amend rates of fees and penalties
charged by Ministries, Regions and Independent Departments in order
to rationalize with the current level of economic growth.
45
M. Effective Dates for Implementation of these measures
76. Mr Speaker, unless otherwise stated, the new revenue measures
shall become effective on 1st July 2010.
THE BUDGET FRAME FOR 2010/11
77. Mr Speaker, consistent with macroeconomic and fiscal policy
objectives, the Government is expected to collect domestic revenue of
Tshs 6, 003.590 billion (Tshs 6.0 trillion), which is 17.3 percent of Gross
Domestic Product, compared to 16.4 percent in year 2009/10. Revenue
form Local Authorities (LGAs own sources) is projected at Tshs 172.582
billion and privatization proceeds at Tshs 30.0 billion.
78. Mr Speaker, Government expenditure is planned to be Tshs11,
112.419 billion (Tshs 11.1 trillion) for both recurrent and development
expenditure. Expenditure will be financed through domestic revenue,
domestic loans and external grants and loans.
79. Mr Speaker, our Development Partners are expected to
provide Tshs3, 274.553 billion (Tshs 3.27 trillion) to support our
2010/11 budget. Of this amount, Tshs 821.654 billion will be for
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General Budget Support and Tshs2, 452.91 billion (Tshs 2.4 trillion) will
be grants and loans for development projects.
80. Mr. Speaker, the Government intends to borrow Tshs 2,128.832
billion (2.1 trillion) from both domestic and external commercial
sources. Of this amount, Tshs 797.62 billion will be for rolling over
maturing Government securities and the remaining amount of Tsh
1,331.2 billion (1.3 trillion) will be used to finance the development
projects.
81. Mr. Speaker, the budget frame takes into account the expected
outcomes of the tax measures that I explained above. The following
table summarizes the budget frame for 2010/2011.
BUDGET FRAME 2010/2011
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Revenue Shillings in Millions
A Domestic Revenue 6,003,590
(i) Tax Revenue 5,652,580
(ii) Non Tax
Revenue
351,000
B LGAs Own Source 172,582
C Foreign Loans and
Grants- general Budget
Support
821, 645
D Foreign Loans and
Grants- Basket and
projects
2,452,908
(i) Project Loans
and Grants
(ii) Basket
Loans and
Grants
1,975,120
477,788
E
External and
Domestic Borrowing
1,331,212
F
Domestic Borrowing
(Roll Over)
797,620
G
Privatization
Proceeds
30,000
Total Revenue
11,609,557
Total Expenditure
H
Recurrent
Expenditure
7,790,506
(i) Public Debt 1,756,044
(ii)Ministries 4,155,768
(iii)Regions 119,580
(iv)Local Government
Authorities
1,759,114
I Development
Expenditure
3,819,051
(i) Local
1,366,143
(ii)Foreign 2,452,908
Total Expenditure 11,609,557
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82. Mr. Speaker, the 2010/2011 budget is a continuation of
Government’s efforts in pursuing the objectives of MKUKUTA,
Millennium Development Goals and Development Vision 2025.
However, in order to achieve these objectives much earlier, every citizen
should participate effectively in utilising emerging opportunities in
engaging in income generating activities.
83. Mr. Speaker, active involvement of all Tanzanians in production
activities is important for growth of our national economy. Improving
agriculture, livestock and industrial sectors, as well as agro-business
have the potential to contribute to the GDP and employment creation.
This budget is also focusing on land development and connecting the
country with a network of roads, railways, communication and energy
infrastructures.
84. Mr. Speaker, as I stated earlier, this is the last Budget Session for
the five-year term of the Fourth Phase Government. Most of us will go
back to our constituencies to seek re-election in order to come back to
this esteemed House. I hope that our voters will not forget the
achievements made by the Honorouble Members of Parliament of the
Fourth Phase Government.
85. Mr. Speaker, I would like to extend my special thanks to his
Excellence, Dr. Jakaya Mrisho Kikwete, President of Tanzania, for his
outstanding leadership and for giving me the honour to serve as Minister
for Finance and Economic Affairs during the Fourth Term Government.
I also wish to thank His Excellence, Dr. Mohamed Shein, the Vice
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President, for his leadership especially in dealing with union matters.
Likewise, I also wish to thank Honourable Mizengo Kayanza Peter
Pinda (MP), the prime Minister for effectively coordinating Government
business in Parliament and for his cooperation and guidance that helped
me to perform my duties effectively. I also wish to thank my fellow
ministers and all Members of the Parliament for the cooperation you
extended to me in the course of performing my duties.
Finally, I would like to thank all voters in Kilosa who voted for me and
made it possible for me to be their representative in this House for five
years and I believe I did not let them down.
86. Mr. Speaker, I beg to move.