Montreal, Quebec, June 14th, 2011– Hilbroy Advisory Inc. (DeutcheBörse: 2H0) Hilbroy Advisory Reports: Tanzania plans to raise all fees for business licenses to help fund its budget, a decision analysts warned could scare away potential investors even as the country eyes foreign direct investments to grow its economy.
The Business Licensing Act is to be amended later this month to adjust fees for all business licensing categories allowing local government to start collecting the taxes on behalf of the central government.
Describing the plan as a path to prosperity, the Minister of Finance and Economic Affairs, Mustafa Mkulo said that from July this year, town authorities will impose $31.2 annually for any business except hard drinks undertaken in the cities, municipals and towns.
Mr. Mkulo said that district councils will impose and collect business license fees of $18.7 annually for any business undertaken in their areas while village councils will collect business license fees of $6.2 annually for any business in the area.
The Government is expected to collect tax and non tax revenue of $4.239 billion equivalent to 17.2 percent of GDP. Revenue from Local Government is projected at $219 million equivalent to 5.2 per cent of domestic revenues collected by the Central Government.
Judith Muhindu, an economist with Millennium Tax Consultant Group said the amount reflects measures that will be taken by the government to improve revenue collection when compared with 2.9 per cent of the domestic revenue collected in 2010/2011.
According to Mr. Mkulo the new reform on taxes will strengthen supervision of business and compensate the loss of revenue experienced by the local governments following the decision to abolish some of their sources of revenue.
In recent years, the government has relied on development partners funding to close the national budget gaps, instead of making tough choices about what services the government should provide, and how much it can afford.
Despite the new financial reforms on collections of taxes, fees and levies the government budget continued to depend on assistance from development partners to the tune of 17 percent of the budget in 2010/2011 down from 28 per cent in 2007/2008.
In response, Mr. Mkulo said that the Government has decided to take strong measures to improve domestic revenue collection which includes broadening the tax base, increase efficiency in revenue collection and identification of new tax payers; control expenditure so that by the year 2015, the percentage of aid dependence does not exceed 10 per cent of the budget.
Overall, the government is proposing to increase taxes on carbonated soft drinks and beer from local raw material to $0.043 per liter and Tshs 249 per liter respectively. The budget also raises excise duty on cigarettes to as much as $18.290.
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