Finance Bill 2024: Key Changes and Proposals
Introduction
The Finance Bill 2024 introduces a series of amendments aimed at enhancing economic growth, improving domestic revenue mobilization, and refining tax administration. This blog post summarizes the key changes proposed across various sectors, providing insights into the bill’s impact on industries, agriculture, energy, infrastructure, and more.
Banking and Financial Institutions
Interest-Free Lending
Amendments to the Banking and Financial Institutions Act, Bank of Tanzania Act, and Microfinance Act enable banks, financial institutions, and microfinance companies to offer interest-free loans. This move aims to facilitate access to financial services for institutions that operate on a non-interest basis, ensuring they benefit from similar opportunities as conventional financial entities.
Budget and Infrastructure
Emergency Road Repairs
The Budget Act has been amended to allow funds from the Contingency Fund to be used for emergency repairs of deteriorating road infrastructure. Additionally, new sources of funding, such as infrastructure levies and revenues from windfall gains due to fuel price decreases, have been identified to support these initiatives.
Agriculture and Industry
Cashewnut Industry Development
The Cashewnut Industry Act has been revised to grant the Cashewnut Board full revenue from export levies for five years. This measure aims to stimulate the cashewnut subsector, providing funds for subsidies, research, and enhancing the sector’s contribution to economic growth.
Cashewnut Levy Remittance
| Year | Levy Remittance to Cashewnut Board |
|---|---|
| 2024 | 100% |
| 2025 | 100% |
| 2026 | 100% |
| 2027 | 100% |
| 2028 | 100% |
Excise Duty Adjustments
Changes to the Excise (Management and Tariff) Act include a 10% excise duty on betting, gaming, and lottery stakes, with the revenue directed to the Universal Health Insurance Fund. Additionally, excise duty on locally produced bottled water has been reduced to support small-scale factories.
Excise Duty Changes
| Product | Old Rate | New Rate |
|---|---|---|
| Locally produced bottled water | Tshs. 63.80 per litre | Tshs. 56.00 per litre |
| Imported Tomato Ketchup and sauces | N/A | Tshs. 300 per kg |
| Imported Solvent Paints | N/A | Tshs. 500 per kg |
| Locally produced undenatured ethyl alcohol | N/A | Tshs. 5,000 per litre |
| Imported undenatured ethyl alcohol | N/A | Tshs. 7,000 per litre |
| Imported opaque beer | N/A | Tshs. 963.90 per litre |
| Other imported beer | N/A | Tshs. 2,959.74 per litre |
Taxation and Revenue
Industrial Development Levy
A new Industrial Development Levy on imported goods aims to boost domestic investment, production, and job creation while protecting local manufacturing industries.
Digital Economy and Income Tax
The Income Tax Act has been amended to include provisions for taxing digital content creators and transactions involving digital assets. This aims to expand the tax base and enhance clarity regarding tax obligations in the digital economy.
Key amendments include:
- Section 3: Provides definitions for “artisanal miner,” “digital content,” and “digital content creator” to enhance clarity in the Act.
- Section 4: Exempts tea processing companies making losses for three consecutive years from paying alternative minimum tax for three years.
- Section 11: Requires deductions for income tax purposes to be supported by fiscal receipts, except for non-resident suppliers with no physical presence.
- Section 19: Mandates loss-making companies to pay tax at 40% of taxable income from the fourth year onwards, before deduction of unrelieved losses.
- Section 56: Excludes allotment of shares in a resident entity from tax to align with the policy of taxing gains from indirect disposal of shares.
- Section 64: Includes advancement of health and environmental protection as criteria for obtaining charitable organization status.
- Section 82: Imposes withholding tax on payments for the use of construction equipment and machinery, with exemptions for interest payable by resident financial institutions to non-resident financial institutions under specific agreements.
- Sections 83B, 83C, and 83D: Introduce withholding tax obligations for payments to digital content creators, owners of digital assets, and resident intermediary persons in agricultural, livestock, forestry, and fishery sectors.
VAT and Local Production
The Value Added Tax (VAT) Act includes several amendments, such as zero-rating VAT on locally manufactured fertilizers and garments made from locally grown cotton for one year. These measures intend to support local production and reduce consumer costs.
Key amendments include:
- Section 6: Zero-rates VAT on the importation or supply of water sanitation and treatment chemicals upon approval by the Minister responsible for water.
- Section 11: Corrects HS codes for goods subject to VAT.
- Section 29: Requires non-compliant persons to notify the Commissioner General and introduces penalties for failure to do so.
- Section 51: Expands the scope of taxable electronic services to include online data services.
- Sections 55A and 55B: Extend the zero-rating periods for the supply of various goods and services to specific dates in 2025.
- Sections 55C and 55D: Zero-rate the supply of gold to the Bank of Tanzania and refineries in Mainland Tanzania.
- Section 84: Mandates the refund of VAT within thirty days from the application date.
VAT Changes
| Description | Old Rate | New Rate |
|---|---|---|
| Locally manufactured fertilizers | Standard VAT | Zero-rated |
| Garments made from locally grown cotton | Standard VAT | Zero-rated |
| Water sanitation and treatment chemicals | Standard VAT | Zero-rated |
Tax Administration Act
Key amendments to the Tax Administration Act are aimed at improving tax compliance and administration efficiency.
Key amendments include:
- Section 3: Adds a definition for “tax audit” to include desk audit, issue-oriented audit, and comprehensive audit.
- Section 34: Recognizes electronic means, such as email and fax, for serving documents to the Commissioner General or taxpayers.
- Section 37: Requires tax returns of parastatals or entities substantially owned by the government to be declared accurate by both the manager and head of finance or a certified public accountant.
- Section 51: Deems objections to tax assessments admitted when conditions are met and introduces a timeframe for addressing objections.
- Section 73: Subject to sections 71 and 72, clarifies the process for handling taxpayer accounts.
- Section 76: Adjusts references to sections within the Act for better clarity.
- Section 86: Increases penalties for non-compliance, including fines and imprisonment.
- Second Schedule: Increases the value of one currency points from 15,000 to 20,000. (used for penalties)
Transport and Infrastructure
Motor Vehicle Registration
The Motor Vehicle (Tax on Registration and Transfer) Act now includes electrical motor vehicles, ensuring that all types of vehicles contribute to government revenue while accommodating technological advancements.
Motor Vehicle Registration Tax
| Vehicle Type | Registration Tax |
|---|---|
| Micro Hybrid (5< Kw) | Tshs. 95,000 |
| Mild or Semi-Hybrid (6-30 Kw) | Tshs. 250,000 |
| Full Hybrid (31-40 Kw) | Tshs. 250,000 |
| Plug-in Hybrid (41-90 Kw) | Tshs. 250,000 |
Railway and Road Development
The Railway Development Levy on imported goods has been increased from 1.5% to 2%, with the revenue split equally between the Railway Development Fund and the Road Fund. This change aims to secure funds for the development and maintenance of railway and road infrastructure.
Environmental and Health Initiatives
Water and Sanitation
Amendments to the Plant Health Act and other related laws mandate the Tanzania Revenue Authority to collect export and import levies on crops, with a significant portion of the revenue directed to the Agricultural Development Fund. These changes aim to improve levy collection efficiency and support agricultural sector development.
Health Insurance Funding
The Universal Health Insurance Act now specifies that 2% of excise duty from carbonated drinks, alcoholic beverages, and cosmetics, along with 100% of excise duty on gaming stakes, will be allocated to the Universal Health Fund.
Conclusion
The Finance Bill 2024 introduces comprehensive changes across multiple sectors, aiming to foster economic growth, enhance revenue collection, and improve infrastructure and public services. By addressing various facets of the economy, the bill seeks to create a more robust and resilient financial environment for the country.
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