Blueprint for Regulatory Reforms to Improve the Business Environment

Blueprint for Regulatory Reforms to Improve the Business Environment The Tanzania Business Action Plan Blue Print (the Blueprint) has two parts:  Blueprint for Regulatory Reforms to Improve the Business Environment in Tanzania, 2018; and  Blueprint Action Plan (BAP), 2019. The Blueprint provides the Government’s main framework for enabling a holistic review of the business enabling environment ( BEE) in order to improve the business climate in Tanzania. The Blueprint lays down the foundation to achieve an industrial economy by putting in place a framework for addressing regulatory hurdles and create a smart, functional and fair business regulatory regime in Tanzania. Blueprint Action Plan (BAP), 2019 The official implementation of BAP is expected to commence in July 2019.

The main objective of BAP is to highlight challenging areas, consider indicative costs, timeframe and institutions responsible for implementation of the proposed reforms to improve the BEE.

As part of the Government's efforts to improve the BEE and for better implementation of BAP, the President of Tanzania met with the business community on 7th June 2019, in Dar es Salaam and the key issues raised by the business men were:  Challenges when dealing with the Tanzania Revenue Authority (TRA) and the Police – there were complaints that the TRA and the police have in some instances been harassing businessowners, issued overestimated tax assessments and illegal business lock-downs.  Unfair tax regime and exemptions – it was proposed that the Government needs to review the tax regime to make it friendly, proper trainings on taxation should be provided, bureaucracy and corruption should be dealt with.

It was recommended that the Government should grant tax exemptions during the initial stages of a business to allow the business owners to focus on building the business as opposed to using capital to pay taxes.  Multiple fees and charges –multiple fees and charges imposed by several government authorities are a roadblock to the business environment in the country. It was discussed that such fees and charges should be paid through a central portal and other unnecessary fees and charges should be removed.  VAT refunds – this was also raised as a key issue which plays a key role in restraining businesses in Tanzania.

VAT refunds are not being processed within a reasonable time causing most of the business capital to be stuck in the process of refunds.  Involvement of locals – the business community raised a concern that despite being able to bid and provide services in Tanzania, most of the contracts (including government contracts) are being awarded to foreign entities. Even with local content requirements under the legislations and contracts, there has been poor involvement of local entities in such contracts and the Government needs to put more emphasis on this issue.  Government's delays in honouring contracts – business persons who

have contracts with various Government authorities complained that their payments are being delayed (despite having express contracts stating when they should be paid) leading to defaults on their bank loans and payment of hefty interest and penalties for such defaults.  Transparency – there is lack of transparency in the decision making by various Government authorities especially in matters relating to award of contracts.  Tanzania Investment Centre ( TIC) being a true central hub – the business community requested that the TIC should be the central hub for all licences and permits that a person is required to get in order to operate in the country.

It's challenging to most business people especially foreign investors who have to travel to multiple Government authorities to obtain various permits.  Amendment and uniformity of laws and operations of the Government authorities – the businessmen argued that Government authorities need to work jointly to assist investors as opposed to giving conflicting decisions/directions which leaves the investors without assistance.

There is a need to have clear and open communication between Government authorities to assist in business operations.  Work and residence permits – the businessmen stated that there are bureaucracies and delays in processing of work and residence permits which has in numerous occasions led to delay in projects because the relevant experts are unable to enter into the country to commence their assignments.  Stabilization of laws – it was discussed during the meeting with the President that constant changes in the laws is challenging to most businesses and there was a request that the laws should be stable to enable businesses to plan for a long term.

Objectives of BAP The key objectives of BAP in improvising BEE are:  Adopting and implementing activities to promote and ensure efficient regulatory procedures, licensing and approvals;  Simplifying the business-regulatory regime to avoid duplications and overlaps of mandates within the regulatory agencies;  Promoting transparency within regulatory authorities by using Information and Communication Technology (ICT) platforms to provide timely the requisite information on service and processes required;  Establishing an effective M&E framework to ensure effective implementation of the Blueprint; and  Implementing an inclusive approach geared on ensuring all the stakeholders are consulted in decision making by the Government authorities.

2019/2020 Budget Meeting Proposals: a) Reduced Corporate Income Tax ( CIT) for new investors in manufacturing of sanitary pads from 30% corporate tax to 25% corporate tax. The Government aims to attract more investment in the manufacture of sanitary pads in the country.

b) Requirement to file audited financial statements to the TRA should apply to businesses with annual turnover of Tshs. 100 million and above. The current status is that businesses with Tshs. 20 million and above annual turnover should file audited financial statements with the TRA.

The aim is to encourage establishment of small businesses and to reduce regulatory compliance on small businesses which also costs money. c) Exemption of withholding tax on loans secured by the Government from non-resident banks and financial institutions. d) Tax Amnesty (which has allowed persons with outstanding taxes, interest and penalties to have an opportunity to discuss with the TRA and have their outstanding taxes reduced and their interests and penalties waived) deadline has been extended to December 2019. e) Establishment of an ‘Office of Tax Ombudsman’ under the Ministry of Finance and Planning - an independent office that will deal with complaints against TRA officials regarding tax administration including corruption, arbitrary assessments and unlawful closure of businesses. f) Transfer pricing should be strictly implemented by providing adequate training to the tax officials and the purpose is to understand intercompany arrangements and ensure all taxable transactions are taxed. g) Grace period of six months from the date of receiving a tax identification number prior to commencing payment of the income tax. h) Priority projects and sectors  The Government intends to prioritize the aviation sector by exempting aviation imports from import tax e.g. importation of aircrafts, aircraft engine or other parts, lubricants imported by domestic operators of air transportation.  Infrastructure – the Government is keen to implement a number of high profile infrastructure projects: (a) Rufiji Hydroelectric Project - in December 2018, Tanzania signed an agreement to build the Stigler’s Gorge Hydroelectric Power Station, in the Rufiji River.

The project is estimated to cost $2.9bn and will be entirely financed by the Government of Tanzania. (b) The East Africa Crude Oil Pipeline (EACOP) - The EACOP is a 1,445 km crude oil export pipeline that will transport Uganda’s crude oil from Kabaale – Hoima in Uganda to the Chongoleani peninsula near Tanga port in Tanzania. With an estimated cost of USD 3.5bn. (c) Standard Gauge Railway ( SGR) - SGR is the new railway project that will eventually connect Dar es Salaam to Kigali along 1,090 miles of track. The Government expects the first phase, costing USD 1.9bn and covering 186 miles between Dar es Salaam and Morogoro, to be completed by December 2019. (d) An extension of the Sealander Bridge in Dar es Salaam – the extension is expected to cut across the Indian Ocean to reduce congestion over the existing Sealander Bridge. The

bridge is estimated to cost Tshs. 256 billion will be completed after 30 months. The funding is provided by a concessionary loan from the Republic of Korea through its Economic Development Cooperation Fund (EDCF). (e) Construction of road in Dodoma and the Government has set aside 38bn/- for implementing the project. The Deputy Minister for Works, Transport and Communication stated that Dodoma City has been given special attention and the Government intends to improve its infrastructure starting with roads. (f) Construction of a major dam in Njombe by the Government.

The construction is expected to commence in January 2021 and will be completed in June 2023 and it is expected to produce 222 MW of electricity.  Agriculture and the Extractive Sector (i.e. mining, oil and gas) continue to be promoted by the Government by setting up mineral trading centres which have witnessed a huge success in a short time that they have been set up. Disclaimer The views expressed in this paper are those of the author only and should not be considered as an official interpretation, defamatory or interference of any legislation, laws or policies of any country including Tanzania. The content of this article should not under any circumstances be reproduced or used without the express written consent of the author.

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