The Dar es Salaam port. The TRA says that the cost of port services is cheaper in Dar. PHOTO | FILE
What you need to know:
The measures to broaden the tax base have started to bite, with some hotels in Dare es Salaam turning their facilities into hostels.
Businesses in Tanzania are accusing the government of being anti-business after its recent announcement that it will introduce value added tax on ancillary services.
During an East Africa Business Council meeting this month, Gilead Teri, the director of policy at the Tanzania Private Sector Foundation, said the introduction of VAT on ancillary services provided for goods in transit had resulted in a drastic decrease in the amount of transit cargo shipped via the Dar es Salaam port; competing ports don’t charge VAT on ancillary services.
“Introduction of 18 per cent VAT on tourism services such as game driving, water safaris, animal or bird watching, park fees and ground transport services will be unfavourable for business,” said Mr Teri.
The measures to broaden the tax base have started to bite, with some hotels in Dare es Salaam turning their facilities into hostels.
Kassim Omar, the chairman of the EABC Uganda Chapter and national chairman of the Uganda Clearing Industry and Forwarding Association, told the meeting that businesspeople require 10 documents to import or export to Tanzania, which attract costs estimated to be double the cost incurred in other sub-Saharan countries.
“Having discriminatory taxes between domestic and imported products from EAC partner states is against Article 15 on National Treatment of EAC Customs Union Protocol, which prohibits EAC partner states from enacting legislation or applying administrative measures that directly or indirectly discriminate against the same or like products of other partner states,” Mr Omar said.
He further claimed that unlike other EAC partner states, Tanzania has been slow in implementing the Single Customs Territory.
No reversal
However, on Monday, President Magufuli categorically stated that the country would not reverse its decision to charge VAT on ancillary services.
“We are determined to exhaust all available sources in our quest to increase revenues to fund development projects. It’s better to have 500,000 tourists who pay tax than host two million who do not,” President Magufuli said.
“In the past, we had very many containers at the port that were not paying taxes, but the situation has changed. It is better to have fewer ships docking and paying requisite taxes,” the president added.
However, Paul Wallace, the CEO of Tanzania International Container Terminal Services, said that, contrary to the claim that containerised cargo was declining, the opposite was true.
In addition, the Tanzania Revenue Authority published figures of fees charged at Dar es Salaam port compared with Mombasa.
The TRA stated that whereas the cost of service on a 20ft container of transit goods to/from Rwanda is $4,169.81 at Dar es Salaam port (VAT inclusive), at Mombasa port it costs $4,465.00 (VAT exclusive).
“TRA therefore confirms that VAT on ancillary services as defined by the law is not a factor that renders Dar es Salaam port uncompetitive,” said Commissioner General Alphayo J. Kidata in a statement.
