TAXATION REGIME FOR AGRICULTURE IN TANZANIA

1.0 Introduction

While tabling the 2004/05 Government Budget to the Parliament the Minister for Finance charted out a number of tax reform proposals aimed at promoting agriculture. The Minister first described the current agricultural tax regime, and then went on to state the new measures.

Unfortunately, a number of articles in the press have tended to mix up the two scenarios, and have reported both of them as new measures. This has somewhat confused the situation as to what is the applicable regime. In the light of the situation, it has been found reasonable to make some clarification.

2.0 Measures to promote agricultural sector before 2004/05 budget

To promote agriculture the Government had put in place a tax regime, which is conducive to investment in the sector and enabling to productivity of small-scale farming. The setting of enabling environment for agricultural development was in line with the Poverty Reduction Strategy. The predominance of agricultural output in GDP and its massive share of employment to total workforce make it an important ingredient for the strategy's success. The tax regime that had been put in place before the FY 2004/05 in recognition of the central role of agriculture in poverty reduction initiatives include the following:

2.1 Under the Income Tax Act, 2004

The income tax regime obtaining for agriculture contained the following measures aimed at promoting agriculture:

2.2 Under Customs Tariff Act, 1976

2.3 Under Value Added Tax Act, 1977

2.4 Under Stamp Duty Ordinance (CAP 332)

2.5 Under Local Government Finances Act, 1982

2.6 In Government Expenditure Budget

3.0 Measures to promote agricultural sector in the 2004/05 budget

The 2004/05 budget emphasizes the Governmental resolve to ensure improved investment and productivity in agriculture: with the object of increasing employment, food sufficiency, poverty alleviation and exports. Tax policy reform measures charted out in the 2004/05 Government budget, in particular, were directed towards provision of more incentives to investment flow to the agricultural sector to ensure proper exploitation of the vast unutilized land, generating additional employment in rural community and improving productivity in industries producing agricultural inputs. These include:

3.1 Measures to promote large Scale Farming

3.2 Measures to Promote Small Scale Agriculture and Livestock farming

3.3 Measures to Promote Industries for Inputs for Agriculture and Fishing

3.4 Measures to Promote Industries for Processing Agriculture and Fishing Produce

4.0 The Combined Effect of the Tax measures for Agriculture

4.1 Under the Income Tax

4.2 Under the Value Added Tax

4.3 Under the Customs and Excise Tariff Acts

4.4 Under the Stamp Duty Ordinance

4.5 Under the Vocational Education and Training Act (VETA)

4.6 Under the Local Government Finances Act

5.0 Conclusion

The Government recognizes the important role agriculture plays in its poverty reduction strategy. It is the intention of the Government to continue increasing allocation of fund to the sector aimed at promoting it. From time to time, the Government will review its polices, including fiscal policy, in order to create an enabling environment for transformation and modernization of sector. We expect each stakeholder will provide the necessary co-operation to ensure that the Government initiatives produce the desired results.

This notice is published to clear the apparent confusion on the fiscal regime now applicable to agriculture, fishing, animal husbandry and foresting subsections.

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