Industrialists want a budget that accelerates the recovery

By Alex Nelson Malanga

Dar es Salaam. All eyes will be on Finance and Planning Minister Mwigulu Nchemba, who will unveil the main budget for the year 2022/23 next Tuesday in Parliament, with manufacturers expecting to see a budget that will sustain the strong momentum of post-Covid-19. recovery.

The first confirmed case of the pandemic on the globe was confirmed towards the end of December 2019 in Asia, before spreading to Tanzania three months later.

It just so happens that the global manufacturing industry has taken a devastating blow due to reduced demand, affected supply and unavailable labor.

In this regard, next week’s budget is an important opportunity for the government to focus on its efforts to close the gap for a better and sustainable future.

Confederation of Tanzanian Industries (CTI) Trade Policy Specialist Frank Dafa said they expect the measures to be presented in the budget are those that do not hamper the recovery of the sector.

Mr. Dafa said The citizen yesterday that a competitive manufacturing ecosystem would need broad predictability in the business environment in order to attract more investors.

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“We need consistent measures. Tax policies must be clear to all investors,” he stressed.

To catalyze growth in the manufacturing sector, the sector would also need a reduction in tax rates, a move that could be reflected in operating costs.

The confederation has suggested that the prices of electronic tax stamps (ETS) be reduced by 75%, that import duties on wheat be reduced from the current rate of 10% to zero and that import duties on oil edible are reduced from 25% to 10%.

In addition, manufacturers under the CTI umbrella have recommended that Value Added Tax (VAT) on inputs such as spare parts be zero-rated, as well as expediting the payment of VAT refund and 15% additional import duty on industrial sugar.

Considering skyrocketing wheat prices following the Russian-Ukrainian war, CTI’s Dafa said the reduction in import duties would help reduce the shocks exacerbated by the unrest.

Ukraine and Russia together account for more than a quarter of the world trade in wheat, which is an essential food staple.

Rising prices are threatening supplies, as are prices for wheat products that include wheat flour, breads, chapattis, breads, scones, cakes, pastas and cookies.

Manufacturers also believe that a reduction in import duties on edible oil will boost cooking oil production and thus solve a severe shortage and untouchable price of the product.

Currently, according to official data, Tanzania’s annual demand for cooking oil is estimated at 600,000 tonnes against local production of 250,000 tonnes.

This leaves a shortfall of nearly 350,000 tonnes which is covered by imports.

“We expect the budget to provide a blueprint to steer the economy onto a high and sustained growth path. Reforms in the blueprint should prioritize tax and charge cuts,” Mr. Dafa.

General Affairs and Sustainability Manager of Tanzania Breweries Limited (TBL), Mesiya Mwangoka, said she expects the budget to support the post-Covid-19 recovery that started last year.

The government, she suggested, could do this by maintaining the current excise rate for the fiscal year July 2022 to June 2023 to allow for a recovery from the drop in volume resulting from the pandemic.

Currently, she said, the tariff was Sh720 per liter of clear beer and Sh450 per liter of opaque beer.

The bear maker warned that any increase in excise duty, on top of the high cost of the ETS, will not only cause production to drop due to increased operational costs, but will also make the product less affordable.

This will in turn reduce demand for the product and therefore sales and government revenue.

Research by TBL, a company that paid 264 billion shillings in excise duty last year, shows that a 5% increase in excise duty, for example, will result in a loss of government revenue of 14 billion shillings between July and December.

“With the increase in excise duties, the prices of our products will increase, thus forcing our customers to turn to the illicit market,” warned Ms. Mwangoka.

“We are still in recovery mode. We need a backup. At least next year we would be able to absorb any increase.

It is also awaiting the budget which seeks to create a favorable fiscal environment.

In the interest of predictability and stimulating investment, investors, she explained, would like the government to come up with an excise duty schedule covering, say, three years.

“What investors always want is predictability in the business environment,” insisted Ms. Mwangoka.

Salum Nassor, director of public affairs, communications and sustainability of Coca-Cola Kwanza, said The citizen that he expected to see the business environment improve further.

He commended the government for maintaining excise duties on soft drinks and removing 15% additional import duty on industrial sugar in the current financial year (2021/22), saying that initiatives like these would increase their sales and improve cash flow.

“I am optimistic that the government will maintain the momentum. We need measures that will take manufacturing to the next level,” Nassor said.

He called for a reduction in the costs of the ETS.

The citizen understands that manufacturers earlier this year proposed a 75% reduction in ETS costs compared to previous tariffs.

However, it is regrettable that the government has decided to reduce it to rates which result in an average reduction of only 4% on all products, with manufacturers claiming that the new rates are only a drop in the bucket. the ocean.

Bakhresa Group’s general affairs director, Hussein Sufian, told this newspaper that he expected the budget to come up with policies that will take into account the effect of Covid-19 and the Russian-Ukrainian war on the manufacturing sector.

“Given that we are still in recovery mode and we are in the middle of the (Russia-Ukraine) crisis, we do not expect the budget to propose changes that will disrupt the recovery of the sector,” said Mr. .support.

Global supply chains were beginning to recover from two years of upheaval caused by the pandemic when the Ukraine crisis hit on February 24 this year.

“Any changes (not in favor of manufacturers) could prevent manufacturers from absorbing external shocks,” Sufian warned.

According to the Private Sector Foundation (TPSF) tax reform proposals that had been submitted to the Ministry of Finance and Planning, members of the private sector are proposing the reduction of stamp duty to at least 1 shilling per stamp.

Currently soft drink producers pay 8.5 shillings per stamp for each bottle of water equivalent to 102 shillings per carton of 12 bottles, regardless of bottle size.

“This increases operational costs for the business and threatens the survival of producers in the industry,” the document reads.

The private sector umbrella body is also proposing the reduction of the excise duty rate from 58 shillings to 3 shillings per litre, which small industry can afford and at the same time the business can survive and be competitive.

TPSF is also proposing to reduce the ETS rate on cigarettes to a maximum of $5 or less per 1,000 stamps, well below the current $20.

It was $4.77 per 1000 cigarette stamps before 2019 when the ETS was introduced to replace the paper stamp.

“The cost is reflected in the cost of production”, specifies TPSF in the document made available to it. The citizen.

The manufacturing sector, which contributes about 8% of Tanzania’s Gross Domestic Product (GDP) in 2021, bears significant responsibility for creating jobs, securing investment, and propelling industrial and national growth.

During the reporting period, according to official data, the sector created 345,615 jobs.

This suggests that creating a business-friendly environment will attract more investment into the sector and thus help achieve the country’s vision of creating 2.5 million jobs by 2025.

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