Policy Forum’s Budget Working Group (BWG) has commended the government’s reaffirmed plans to raise revenue and cut down expenditures, especially those that are unnecessary like luxurious vehicles which cost the government heavily in terms of both purchases and maintenance costs.
Speaking recently at a live program “Kumekucha” run by ITV, the Deputy Minister for Finance Hon. Mwigulu Nchemba reiterated this commitment to reduce such expenses as well as outlays directed towards hospitality and huge payments on preparations for commemorations like the Environment Day, HIV/AIDS Day, Malaria Day, and the Water Week.
Although these ceremonies have helped raise awareness of social problems and bring together relevant stakeholders to discuss the progress towards alleviating them, for Nchemba it is perplexing to commemorate the Week of Water by spending millions of shillings whilst the nearby communities experience severe water shortage problems. Policy Forum therefore, has recommended modest and prudent spending on these events.
The government’s reiteration comes as the new fiscal year 2014/15 has just started following the approval of the budget by the Parliament last month. During the discussion of the budget proposal, the government stated how it intends to work on the challenges experienced during the last fiscal year. Some of these challenges include; misuse of public funds including spending on unnecessary items, inadequate revenue collection and delays in disbursement. All these affected timely implementation of planned development projects.
“For a long time now government officials have been directed to purchase economic cars as a means of reducing expenditures but this has not been implemented. What we are going to do now is allocating to them funds for the purchase of these economic cars because it does not make sense for a Director to use a Land Cruiser VX while working in Dar es Salaam”, he said. This is something that everyone should encourage and urge the government to make sure that they walk the talk.
Different analyses have been conducted on how the government can improve its budgeting in collecting resources and proper use of the available resources. Tax exemptions play a greater role in denying the government of a significant amount of funds that it could collect and use to fund its budget.
According to a study conducted by Policy Forum, Tax Justice Network – Africa and Action Aid two years ago, it was the noted that Tanzania had the potential to collect taxes amounting to 20.9% of GDP, according to IMF estimates, but was only collecting a little over 14% (2009/10 estimates). Although tax revenues as a share of GDP are gradually increasing (15.8% in 2011/12, this is still short of the acknowledged potential.
The “Tanzania: Per Tax Exemptions Study” which was produced in October 2013 for the Ministry of Finance, points out how much the government is losing through tax exemptions. The report further argues that it is more efficient for developing countries to focus on improving their investment climate rather than granting tax exemptions to corporations. It has actually been confirmed that before investing in Tanzania businesses will consider other (more important) factors than the level of tax exemptions they could get.
According to Sikika, while estimated expenditures on various allowances are stagnating at TSH 360 bn, the estimates for ‘Fuel, Oils, Lubricants’ increase moderately by 6% to TSH 71 bn. Despite the Government’s clear intention to control the costs of seminars and workshops, overall travel expenses are estimated to grow by 11% and the budgets for ‘Hospitality Supplies and Services’ increased by 19% to a total of TSH 24 bn in the 2013/14 budget.
“With the understanding that resources are always scarce, a more prudent spending of public resources has to be emphasized so as to attain maximum service delivery. Spending needs to be more prioritized and that funds are allocated to those areas that benefit the majority of the citizens”, said Nicholas Lekule, Policy Analysis Manager at Policy Forum.
“Do you know that some of the government boards conduct their seminars overseas? Do you know that some of the government agencies the whole team of executives book first and second class tickets to go and hold a seminar outside Tanzania for a month?” asked the Deputy Minister.
“It is from this angle that the BWG commends the proposed measures by the deputy Minister for Finance to curb tax evasion and reduce exemptions as well discourage spending on unnecessary items. The Deputy Minister has detailed how these measures will be employed so as to ensure they are operational. If his views are worked upon, we hope that our government will have at least enough resources to provide primary services to its citizens”, said Fidelis Paul of Wateraid, a BWG member.
“The introduction of the VAT and Tax Administration reform Bills manifest part of the government’s commitment to curb revenue loss challenges. However, Policy Forum feels that more effort should be directed towards achieving the government target of reducing the ratio of tax exemptions as a share of Gross Domestic Product to 1.2% from the current ratio of 4.3%,” said Godfrey Boniventura, the Convener of the BWG
Notes to Editors;
- About the Policy Forum: Is a group of more than 70 registered NGOs that conducts analysis and advocates on the efficient use and acquisition of public money at national and sub-national levels. Its Budget Working Group (BWG) works on conducting and sharing analyses on public budgets and the budget process from a civil society perspective. More information about Policy Forum can be found here
- A report on tax exemption entitled “Tax Competition in East Africa: A Race to the Bottom? Tax Incentives and Revenue Loses in Tanzania,” can be found here
- On unnecessary expenditures, you can read a detailed analysis here
- 2014/15 budget speech can be found here
- For more information on the problem of tax exemptions in Tanzania, you can visit here
For more information please contact;
- Boniventura Godfrey, Co Convener of the Policy Forum BWG
Phone: +255 714 460815
- Nicholas Lekule, Policy Forum Policy Analysis Manager
Phone: +255 713 393061