Finance Minister Announces 2014/15 Tanzania Budget

…East African Co-operation inputs bring in relief in some areas traditionally the focus of high taxes… (Download Entire English Version Speech at the Bottom)

Tanzania Minister of Finance Saada Salum Mkuya walks to Parliament holding 2014/15 budget (Photo: Courtesy of Issa Michuzi Blog)

Tanzania  Finance Minister  Saada Salum Mkuya holds 2014/15 budget (Photo: Issa Michuzi)

The Tanzania Finance Minister, Saada Salum Mkuya read the Tanzania Government budget for fiscal year 2014/15  at Parliament in Dodoma, Central Tanzania on Thursday, June 12, to announce huge tax increases on alcoholic drinks and a reduction of taxes on buses and tractors.

The Minister told Parliement the Government intends to collect Tsh 19.853tr/- from both internal and external sources of revenue, and that  out of this amount 13.408 tr/- will be used as recurrent expenditure while 6.445 tr/- will be spent as development expenditure.

Performance during the previous year 2013/14 shows the economy is stable, she said, adding that the planned budget is achievable if the country remains peaceful. Major highlights of the budget speech are presented below, translated from Kiswahili to English in unofficial language as we understood the speech:


The government conducted research in 2013 and learned 13.9% of Tanzanians use banking services, compared to 9.2% using the services in 2009. The Government also learned 43.5% of Tanzanians use non-bank financial institutions for their financial services compared to 6.7% in 2009.

The non-bank financial institutions include insurance firms, SACCOS, small [private] financial institutions, and mobile phone money transfers. Another 15.8% use informal sector organizations such as VICOBA, ROSCA (Rotating Saving and Credit Associations), VSLA (Village Saving and Lending Associations), showing a decline from 28.9% depending on these services in 2009. But over-all, the research shows 57.4% of Tanzanians have access to financial services.

The nation’s foreign exchange reserves were at a satisfactory level at the end of April 2014, when the country had   $ 4.65 billion in foreign exchange reserves, compared to $ 4.4 billion  at the same period in 2013. This amount  is sufficient to meet the country’s import needs for goods and services for more than  4.6 months,  which is  above the planned capacity to maintain reserves capable of imports for 4.0 months. This financial year’s budget guidelines include the following:

i)   The country’s annual Gross Domestic Product (GDP) is expected to grow by  7.2% during fiscal year 2014/15, and that this growth will increase to 7.7% in the medium term. ii)    It is envisaged that inflation will be tamed to single digit levels,  with hopes that   it will be tamed at 6.0 % during the period that ends June 2014, and at 5.0%  by June 2015. iii)   To increase Government revenue from internal sources to the ratio of 18.9% of  GDP during fiscal year 2014/15. iv)   To bring the budget deficit to 4.9% of GDP when both internal and external sources of revenue are considered. v)   To limit  the increase of broad money supply  (M3) to around 15.5% during the year that ends June, 2015 in order to be in harmony with the  projected economic growth and the inflation levels forecast.  vi)   To maintain  foreign exchange reserves for imports of goods and services to last for four months during the year that ends June 2015. vii)   To strengthen the foreign exchange value of the Tanzania  shilling on the foreign exchange market.

In order to achieve  these broad objectives of the budget, the government has made the following asumptions: i)  That the country remains peaceful, tranquil, and that the peaceful atmosphere is obtained locally, regionally, and throughout the world. ii)  That social- economic activities are vibrant, the people are focused on foreign trade and financial services. iii)  That internal revenue is increased by strengthening existing sources of revenue, and identifying  new sources of revenue, and that tax exemptions are  reduced in number and their supervision is intensified. iv)  To strengthen  financial management and discipline in the use of public funds….


During financial year 2014/14, the government will continue to take policy and administrative measures that aim at increasing the tax base, to  identify new sources of revenue, to  strengthen tax administration, to reduce tax exemptions  given through various laws which include the Value Added Tax law  (VAT).

Policy measures which aim at increasing revenue will include the following measures: i)  To strengthen joint activities, as well as to control and reduce tax exemptions by  the review of various laws which provide  tax exemptions, which will be done through the control and reduction of tax exemptions. ii)  To increase the registration of new tax payers and to raise the efficiency and effectiveness of  tax collection. iii)  Tanzania Revenue Authority (TRA) will increase its days on duty in order to  increase the time available to service tax payers at the  sea ports and at certain order posts.

iv)  To complete writing the new VAT law.  v)  To complete writing the  new Tax Administration Law.  vi)  To strengthen  and  maintain use of Electronic  Fiscal Devices-EFDs in the issuance of business transaction receipts.  vii)  The government will harmonize the collection of  various non-tax revenues in the wake of completion of research in this area. viii)  The  government will continue effort to formalize the informal sector, so that it is made taxable. ix)   All government departments will now submit all their revenue to the main consolidated government fund through the retention scheme.  x) To curb tax evasion, the ministry of finance will  now  issue a special  hot-line telephone number and e-mail address to enable good citizens  to give information  about tax evasion, and;

xi)  Government ministries,  independent government departments,  regional administrations, City councils, Municipalities, Government agencies and institutions and various institutions that collect any kinds of revenue will be directed to use Electronic  Fiscal Devices-EFDs in order to easy revenue collection and to control losses.

The policy stance of the 2014/15 financial year aims to enable the collection of revenue and non-tax revenue  to the tune of Tsh. 12.178 tr, equivalent to 19.2% of GDP. Out of this amount,  Tsh. 11.318 tr will be sources from taxes while Tsh. 859.8 billion will be from non-tax revenue.  Revenue from regional administrations (Halmashauri) will be Tsh. 458.5 billion, equivalent to 0.7% of GDP.

Tanzania will also get funds from development partners who appear on the following list: Canada,  China,  Denmark,  Finland, Hispania,  India,  Ireland,  Italy,  Japan,  South Korea, USA, Norway, Sweden, Belgium, France, Holland, United Kingdom, Germany, Sweden, as well as a number of international organizations.

The international organizations  include the African Development Bank (ADB), World Bank, BADEA, Global Fund, OPEC Fund, Saudi Fund,  European Union, International Monetary Fund (IMF),  and the United Nations organizations from which the government receives invaluable counsel  and advice.  “We thank you  and value your contribution.”

The government will also take soft loans that carry low interest to finance infrastructural development projects. The loans will be taken locally and from external lenders. The government will borrow Tsh. 2.955 tr from the local sources, out of which Tsh 689.56 billion,  equivalent to  1.1% of GDP,  will be used to finance development projects while  Tsh. 2.266 tr will be used  to  pay maturing government bonds.  The government will also borrow Tsh. 1.320 tr from external sources to finance  development projects.


In order to increase revenue and achieve  economic  growth  target  in  2014/15;  I  propose  to make  amendments  of  the  tax  structure,  including  reforms of fees and levies imposed under various laws as follows: -a.  The income Tax Act, CAP. 332;  b. The Excise (Management & Tariff) Act, CAP 147; c.  The Road and Fuel Tolls Act, CAP. 220;  d.The  Motor  Vehicle  Registration  and  Transfer  Tax  Act, CAP 124;  e. The Export Levy Act, CAP 196;   f. The Tanzania Investment Act, CAP 38;  g. The Vocational Education and Training Act, CAP 82;  h. The Business Licensing Act, No. 25 of 1972;   i. The  East  African  Community  Customs  Management Act, 2004;  j. Amendments  of  the  Fees  and  Levies  charged  by

[Amendments in  Laws that concern] Ministries, Regions and Independent Departments;  k.  Administration  of  Taxes  on  import  of  petroleum;  l. Minor  Amendments  in  various  Tax  Laws  and  other Laws; and  m.  [to] amend  the  Public  Finance  Act,   CAP  348,  the Treasury  Registry  Act,  CAP  418  and  Executive Agencies  Act,  CAP  245  with  a  view  to  consolidate public  finances  under  the  Consolidated  Fund  which is managed by the Pay Master General.

A. The income Tax Act, CAP 332;

Madam  Speaker,  I  propose  to  make  amendments to the Income Tax Act, CAP 332 as follows: (i)  To exempt from taxes all incomes and gains to the holders  of  the  bonds  that  will  be  issued  by  the African  Development  Bank  in  Tanzania  domestic capital  market.  This  measure  is  intended  to enhance  the  Bank‟s  ability  to  offer  low  cost  loans in  investment  of  various  development  projects such as infrastructure projects etc; (ii)  Impose  15  percent  final  withholding  tax  on  Board of Directors‟ fees;

(iii)  Remove  corporate tax  exemption  to  companies  for income derived from gaming; (iv)  Remove  exemption  of  withholding  taxes  on  Rental charges on aircraft lease paid to a non-resident by a  person  engaged  in  air  transportation  business. The  measure  is  intended  to  scale  down  level  of  exemptions and increase Government revenue; (v)  Remove  powers  of  the  Minister  for  Finance  to grant exemptions for projects relating to expansion and  rehabilitation  undertaken  by  investors.  This exemption  is  currently  granted  to  investors  who own TIC Certificates; (vi)  Adjust  PAYE  threshold  from  13  percent  to  12 percent. This measure is intended to provide relief of tax burden to employees; and (vii)  To  increase  the  rate  of  presumptive  tax  from  2 percent  to  4  percent  for  annual  turnover  which exceeds  Shs.  4,000,000  but  not  exceeding  Shs. 7,500,000  for  record  keeping  businesses;  and increase the current flat rate from Shs. 100,000 to 200,000 for non record keeping businesses. These  measures  together  are  expected  to  increase Government revenue by shillings 31,504 million.

B.  The Excise (Management & Tariff) Act, CAP 147.

I propose to make amendments to  the  Excise  (Management  &  Tariff)  Act,  CAP  147  as follows:-  (i)  Remove  the  excise  duty  rate  of  0.15  on  money transfers  in  order  to  provide  a  re lief  to  a  person who  transfers  money  through  banks  and telecommunication.  Instead,

I  propose  to introduce  excise  duty  of  10  percent  to  be  paid  by banks  and  telecommunication  companies  and various  agencies  for  the  fees  and  levy  they  collect on money transfer services; (ii)  Remove  powers  of  the  Minister  for  Finance  to grant  exemption  on  excise  duty  on  petroleum products.  However,  this  measure  will  not  involve exemptions  granted  through  Agreements  signed between  the  Government  and  development partners  to  finance  development  projects  such  as roads  and  water  supply  infrastructures.

The measure  is  intended  to  rationalize  and  harmonize Government  policies  on  fuel  exemption  and  limit the abuse. It is further intended to harmonize with TIC Act, CAP 38 as amended by Finance Act, 2013 which removed exemption on petroleum products; (iii)  To  change  the  threshold  on  the  age  of  non-utility motor vehicles that are currently being charged an excise  duty  of  25  percent  from  the  current  10 years  to  8  years.

The  measure  is  intended  to protect environment and discourage importation of aged  (obsolete)  vehicles  that  are  prone  to accidents,  deaths  as  well  as  draining  foreign currencies from import of spare parts; (iv)  Continue to impose an excise duty of 5 percent on non-  passenger  utility  motor  vehicles  but  adjust the limit from  10  years to 8  years.  Also, I  propose to  adjust  the  threshold  of  the  passenger  carrying vehicles that are currently being charged 5 percent from  the  limit  of  10  years  to  8  years  and  above.

This measure is intended to promote employment, protect environment and discourage importation of aged  vehicles  that  increase  demand  for  foreign exchange  and  are  prone  to  accidents.  However, this  measure  will  not  affect  tractors  that  will continue to be imported without any tax; (v)  Impose excise duty rate of 15 percent on imported furniture  under  HS  Code  94.01.  During  the financial  year  2013/14  the  Government introduced  an  excise  duty  of  15  percent  on furniture  under  HS  Code  94.03.  All  these measures  are  intended  to  promote  local production  of  furniture  using  locally  available timber. It is also aimed at promoting employment, technology development and  increase Government revenue; (vi)  I propose to adjust by 10 percent the specific rates of  excise  duty  on  non-petroleum  products;  these products  include  soft  drinks,  alcohol,  spirits  etc.

Also,  excise  duty  of  25  percent  will  be  charged  on cigarettes as part of implementation of Framework Convention  on  Tobacco  Control  by  World  Health Organisation  (WHO)  of  which  Tanzania  is  a signatory; (a)  Excise  duty  on  soft  drinks  from  shillings  91 per  litre  to  shillings  100  per  litre;  being  an increase of shillings 9 per litre. (b)  Excise  duty  on  locally  produced  fruit  juices from  shillings  9  per  litre  to  shillings  10  per litre, being an increase of shillings 1 per litre. (c)  Excise  duty  on  imported  fruit  juices  from shillings  110  per  litre  to  shillings  121  per litre;  being  an  increase  of  shillings  11  per (d)  Beers made from local un-malted cereals from shillings  341  per  litre  to  shillings  375  per litre,  being  an  increase   of  shillings  34  per (e)  Other  beers  from  shillings  578  per  litre  to shillings  635  per  litre;  being  an  increase  of shillings 57 per litre.

(f)  Wine  produced  with  domestic  grapes  content exceeding 75 percent, from shillings 160 per litre to  shillings  176  per  litre,  being  an  increase  of shillings 16 per litre. (g)  Wine  produced  with  more  than  25  percent imported grapes from shillings 1,775 per litre to shillings  1,953  per  litre;  being  an  increase  of shillings 178 per litre. (h)  Spirits  from  shillings  2,631  per  litre  to  shillings 2,894 per litre; being an increase of shillings 263 per litre.

(i)  Excise duty on bottled water will not be affected by these adjustments; (vii)  To amend excise duty rates on cigarettes as follows: (j)  Cigarettes  without  filter  tip  and  containing domestic  tobacco  more  than  75  percent  from shillings  9,031 to  shillings  11,289  per thousand cigarettes; being an increase of shillings 2.25 per (k)  Cigarettes  with  filter  tip  and  containing  tobacco more  than  75  percent  from  shillings  21,351  to shillings  26,689  per  thousand  cigarettes;  being an increase of shillings 5.30 per cigarette.

(l)  Other  cigarettes  not  mentioned  in  (j)  and  (k) from  shillings  38,628  to  shillings  48,285  per thousand  cigarettes;  being  an  increase  of 48 shillings  9,657  per  thousand  cigarettes  or shillings 9.65 per one cigarette.  (m)  Cut  rag  or  cut  filler  from  shillings  19,510  per kilogram  to  shillings  24,388 per  kilogram;  being an increase of shillings 4,878 per kilogram; and, (n)  The excise duty rate on “cigar” remains at 30 per The excise duty measures together are expected to increase Government revenue by shs. 124,292.0 million. C.  Road and Fuel Tolls Act, CAP 220 90.  Madam  Speaker,  I  propose  to  amend  the Road and  Fuel  Tolls  Act,  CAP  220  to  remove  powers  of  the Minister for Finance in granting fuel levy exemption, except for exemptions granted through Agreements signed between the  Government  and  development  partners  to  finance development  projects  such  as  roads  and  water  supply infrastructures etc.

D.  The  Motor  Vehicle  Registration  and  Transfer  Tax Act, CAP 124

I  propose  to  make  amendments to the Motor Vehicle Registration and Transfer Tax Act, CAP 124  with  a  view  to  differentiate  the  registration  system  of motor  cycles  from  motor  vehicles  by  changing  the prefix from  T  to  TZ.  The  aim  of  this  is  to  fight  crime  practices which are associated with the use of motor vehicles prefix in motor  cycles.  This  measure  is  not  expected  to  contribute any revenue to the Government.

E.  The Export Levy Act, CAP 196

Madam  Speaker,  I  propose  to  reduce  the  export levy on raw hides and skins from 90 percent or Shs 900 per kilogram  to  60  percent  or  Shs  600  per  kilogram  whichever is  higher.  The  measure  is  intended  to  curb  illegal exportation  of  raw  hides.  Investigation  indicates  that  there has  been  no  raw  hides  that  have  been  exported  through recognized border posts, in stead most of it is smuggled out. This  measure  is  also  intended  to  promote  domestic processing value addition and employment creation. This  measure  is  expected  to  increase  Government  revenue by Tshs. 5,778.7 million.

F.  The Tanzania Investment Act, CAP 38;

I  propose  to  make  amendments to the Tanzania Investment Act, CAP,38 as follows:-i.  Remove  cement  from  the  list  of  deemed  capital goods  which  enjoys  tax  exemptions  under  the Tanzania  Investment  Centre.  This  measure  is intended to promote the production of cement in the  country  and  protect  local  industries  from competition with imported cement;  ii.  Remove  all  tax  exemptions  on  investments granted  to  telecommunication  operators  under the  Tanzania  Investment  Center  for  deemed capital goods such as telecommunication towers and  their  accessories,  generators,  tower  fences, vehicles,  base  station  accessories,  earthing, surge, and lightening protection system etc;


I  propose  to  introduce  a  new  definition  for strategic  investor  by  changing  the  lower threshold  capital that  an  investor  is  required  to invest  in  order  to  qualify  as  strategic  investor. Therefore, I  propose to increase the threshold  of capital  for  foreign  investors  from  US  Dollars  20 Million  to  US  Dollars  50 millions.  The  objective of  this  measure  is  to  direct  investment incentives to large capital investments. However, I  propose  to  maintain  the  threshold  of  US Dollars  20  Million  for  Tanzanian  Citizens  in order to promote local investors.

DOWNLOAD ENTIRE SPEECH HERE:  English Budget speech 2014