Economists and experts from both public and private sectors said yesterday that the 2021/22 national budget is growth-oriented and encourages investors to open up businesses in the country.
Finance and Planning Minister Dr Mwigulu Nchemba on Thursday tabled in Parliament a 36.33tri/- budget for the coming financial year, the first Budget of the sixth phase government under President Samia Suluhu Hassan.
Experts lauded the Budget’s focus on the fiscal regime, saying the proposed changes are indicative of the government’s openness and commitment to deal with investor concerns.
The PricewaterhouseCoopers (PwC) said there are all reasons to be optimistic due to a “very real and meaningful ongoing engagement” between the public and private sector.
“There is every reason to be optimistic that all parties are committed to a win-win scenario. Certainly the mood of the moment is one of optimism as regards future prospects,” PwC said.
The firm said the 2021/22 budget tone is much more medium and long term, with this budget being the first annual plan in the implementation of the new Five-Year Development Plan 2021-2026 (FYDP III).
PwC said that the initiatives taken by the government to modernise agriculture, which is a large part of the economy, and to drive further digitisation of the economy will be key. The PwC also lauded the proposal to remove the 100 per cent penalty for a transfer pricing adjustment.
“The removal of this penalty is a positive step as the penalty was disproportionate albeit rarely enforced. In April, President Samia ordered sweeping reforms in the investment sector, as part of the government’s grand plan to restore investors’ trust in the country.
She called on the Tanzania Investment Centre (TIC) to come up with One-Stop Centre, to coordinate investors’ needs under one roof to clear perception among foreign investors that the country is unpredictable.
Economist-cum-Investment Banker, Dr Hildebrand Shayo said Tanzanians once again are beginning to understand what needs to be done to not only provide relief to its people, but also to accelerate economic growth.
Dr Shayo said the budget, however, needs to explore more new sustainable sources “to guarantee our government sizable and steady revenue.”
“The challenge I foresee in the implementation of the proposed budget is whether the new tax proposed increase would make sense at a time let say fuel price is up as the world economy starts to open up,” Dr Shayo said.
“It is my expectation our honourable members of the parliament would jointly help Mwigulu Nchemba’s presentation with options that would open up more news avenues,” he added.
Vertex International Securities’ Manager of Advisory and Capital Markets Mr Ahmed Nganya said the “budget will boost FDIs and DFPs as the approval process is shortened.”
In the new budget, the government has also proposed to decrease the contribution rate to the Workers Compensation Fund (WFC) from 1.0 per cent to 0.6 per cent for the private sector.
PwC said the change will provide relief to the private sector employers by reducing the burden of their contributions to the Fund, expressing optimism that the move will improve the business environment in the country for existing and upcoming investors.
PwC said the budget targets look ambitious, particularly, a tax revenue budget 9.1 per cent higher than the 2020/21 budget, and 20.4 per cent than the 2020/21 forecast.
“Ultimately, tax increases will need to be driven by “growing the pie” -and indeed the real GDP growth rate is projected to increase to 5.6 in 2021,” PwC said.
Moreover, the Tanzania Chamber of Commerce Industries and Agriculture (TCCIA) said the proposed national budget has good gestures of creating a competitive economy through employing many people and boosting the economy.
TCCIA president Mr Paul Koyi said the budget will boost agriculture related activities and support the country’s economic growth.
“Waiving tax on cold rooms will see flowers and vegetable producers increasing their production. Such products will also be exported at competitive prices and win the market,” said Mr Koyi.
Mr Koyi also hailed the commitment expressed by the government in carrying on with construction of strategic projects.
He said implementation of the projects will see the private sector growing steadily as local content policy adopted in 2018 calls for involvement of local companies in supplying services to such projects.
Tabling the budget on Thursday, Finance and Planning Minister Dr Mwigulu Nchemba said during the next fiscal year, the government would focus on among other things, improve business environment by reviewing policies, laws and various regulations in order to attract private sector investments and increase employment opportunities.
He said the government would also keep improving tax collection and administration system s so as to simplify tax payments and widening the tax base; and continue strengthening Parastatal operations to operate profitably, pay dividends and appropriate contribution to the Government.