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The East African : May 19th 2014
34 WIDENING THE NET Law amendment seeks to boost tax collection Bill d≥afte≥s eye inc≥eased ≥evenues by ≥educing o≥ ≥emoving exemptions By ERICK KABENDERA The EastAfrican T anzania plans to amend the law so as to reduce or re- move tax and duty exemptions, which would enable it to collect Tsh800 billion ($500 million) in additional revenue in the next financial year. The anticipated revenue is es- timated to be 30 per cent of the current VAT collections, which are projected to total Tsh2.6 trillion ($1.62 billion) in the 2013/ 14 financial year, according to information from the Tanzania Revenue Authority (TRA). International financial insti- tutions and activists have been pushing for tax and duty reforms that could see savings of about Tsh1.8 trillion ($1.1 billion) to narrow the budget deficit. The Value Added Tax Bill 2014 proposes that the government, which hitherto had unrestricted powers to grant or amend exemptions, must seek approval of the national assembly before it reviews, grants or abolishes a tax exemption and relevant exemptions must be included in the specific sector’s legislation. The proposal to remove ex- emptions on imports for use in the mining, oil and gas exploration sectors could however elicit protests from mining and international oil and gas firms, who could cite violation of agreements with the government. The Bill also targets tax and duty exemptions to elected officials and abolish powers to give SNAPSHOT A Bill seeking to amend the VAT law will be tabled in parliament soon. ADDITIONAL REVENUE: The government hopes to collect Tsh500bn after reducing or removing tax exemptions. PRESSURE: International financial institutions and activists have been pushing for reforms that could see savings of about Tsh1.8tr to narrow the budget deficit. FEARS: Some ruling party stalwarts are reportedly unhappy with the timing of the Bill, fearing to disappoint sponsors for the 2015 polls. flexible leeway in granting or modifying exemptions. William Lukuvi, the Minister of State for Policy, Co-ordination and Parliamentary Affairs in the Prime Minister’s Office, confirmed without giving details that the Bill will be tabled during the ongoing budget session. Zitto Kabwe, the chairman of the Parliamentary Public Accounts Committee (PAC), said the Bill does not seek to remove all exemptions but will lead to their review to inform a decision on what to retain or change. “If you scrap exemptions for religious institutions, which comprise three per cent of the total exemptions, you are likely to distract attention from the Bill,” The EastAfrican OUTLOOK MAY 17-23,2014 Numbe≥ of displaced ‘highest in 20 yea≥s’ By SPECIAL CORRESPONDENT NYT Service THE NUMBER of people forced to flee their homes by violence has reached the highest level in 20 years, the head of the Norwegian Refugee Council said on Wednesday, criticising the failure of global powers to take timely preventive action. More than 33 million people were displaced within their countries as a result of conflict by the start of this year, said Jan Egeland, the head of the council and a former humanitarian affairs chief for the United Nations, as he presented an annual assessment by the agency’s Geneva-based Internal Displacement Monitoring Centre. “We have surpassed the dark- est, bleakest days of the 1990s,” which were overshadowed by genocide in Rwanda and war in the Balkans, Egeland said in an interview. A gas plant in Tanzania. Removal of exemptions on imports for mining, oil and gas exploration could prompt protests. Picture: File he said. “We are determined to keep such exemptions.” Foreign investors and some major local businesses are the biggest beneficiaries of tax exemptions. There are reports that some people within the ruling party, Chama Cha Mapinduzi (CCM), are unhappy with the timing of the Bill, fearing to disappoint business people, on whose support they are counting on in the 2015 general election. Sources privy to the drafting of the Bill said the government would seek support from other East African Community states and regional economic zones to adopt a “code of conduct for investment incentives” in order to prevent multinationals from moving between countries in search of better tax treatment. Most of the incentives were established to attract foreign investment and there are widespread fears that the Bill will hamper Tanzania’s competitiveness in attracting foreign trade. Dr Honest Ngowi, a senior economics lecturer at Mzumbe University, said scrapping unnecessary exemptions will not affect investment in the country because the government would improve the investment climate to compensate for it. Kenya recently passed a new VAT Act while Rwanda and Uganda are also considering reviewing tax exemptions. If you scrap exemptions for religious institutions, you are likely to distract attention from the Bill,” Zitto Kabwe, PAC chairman Rwanda steps up ene≥gy su∞ciency with new sola≥ deal By BERNA NAMATA The EastAfrican RWANDA IS stepping up investment in solar energy with a utilityscale solar plant following the signing of a $20 million deal this week to build the facility outside Kigali. The 10MW solar photovoltaic plant, to be constructed in Kayonza District in Eastern Province, is expected to boost Rwanda’s electricity supply by 10 per cent as the country grapples with a widening energy deficit that is putting pressure on its economy. Rwanda, which has a 0.25MW solar power plant that has been running on the national grid since 2007, is specifically targeting solar solutions as a lighting substitute for rural schools, health centres, hospitals and administrative offices. The government signed a Memo- randum of Agreement (MoA) with Goldsol II, an energy consortium, to construct the plant, which is expected to be operational by 2016. Goldsol II is composed of three companies — TMM Renewables, incorporated in South Africa, Maltaregistered Gesto Energy Africa and locally incorporated 3E Power Solar. “The realisation of this project will not only contribute to increased access to sustainable, reliable, and clean power generation of about 10 per cent to the existing power generation, it will also serve an estimated 38,800 additional households vis-a-vis the 427,000 connections today,” said Valentine Rugwabiza, the Rwanda Development Board’s chief executive officer, at the signing ceremony. While Rwanda has set a solar energy target of 20MW by 2017, its installed capacity, estimated at around 120MW (local), remains insufficient. This is supplemented by imports of about 14.5MW. “The 2017 energy target is 563MW to allow for affordable access to power to cover most of the country by, 70 per cent, from the 10MW current 19.4 per cent,” Ms Rugwabiza said. Early this year, the government signed a $24 million deal with an American-Israeli green entrepreneur, Yosef Abramowitz, to construct a 8.5MW solar project outside the capital. Run by Gigawatt Global, an American-Dutch solar power firm, the project is set to be operational this year and is expected to boost electricity supply by eight per cent. The plant will feed into the na- Amount of power that the solar photovoltaic plant, to be constructed in Kayonza District, will generate tional grid under a 25-year power purchase agreement signed with the state-owned Energy Water and Sanitation Authority (EWSA), which currently controls generation and distribution of electricity. Pace accelerating The pace of displacement is accelerating, he added, with more than eight million people newly displaced last year, nearly a quarter more than the number in 2012. “You become angry,” Mr Ege- land said. “This could all have been prevented. “These are not tsunami vic- tims; these are victims of manmade conflict.” Mr Egeland underlined the vulnerability of people displaced within countries where conflicts are raging, in contrast to those who escape to other countries, where they become refugees and can have more access to aid and protection. Close to half of those dis- placed in 2013 were in Syria, which remains the biggest displacement crisis in the world. CORRECTION AND APOLOGY An article published in the May 10-16 edition indicated that the World Bank’s financing arm, the International Finance Corporation (IFC), has shown interest in financing the Standard Gauge Railway and a proposed crude oil pipeline from Hoima in western Uganda to Lamu on the Kenyan coast through the Africa50. We have since learnt that the IFC has not entered into any discussions about financing SGR. The only rail project it finances in East Africa is Rift Valley Railways. We apologise to IFC for the error.
May 12th 2014
May 26th 2014