Government yields to pressure over fuel tax

Minister for Finance, Dr William Mgimwa 

By Peter Nyanje 

In Summary

• But, in his response, Dr Mgimwa reminded legislators that the decision to modify fuel taxation was taken in 2012 as a way of controlling fuel adulteration and from the feedback the move has worked.

Dodoma. The government has caved in to pressure from MPs to cut taxes and levies imposed on petroleum products, whereby the exact amount of reduction will be revealed through the Finance Bill to be tabled in Parliament today or tomorrow.

Winding his budget speech on Monday evening, the minister for Finance, Dr William Mgimwa, told lawmakers that the government has taken into consideration proposals made by MPs and decided “to do something alongside what have been proposed.”

“But, the exact and finer details on the measures that the government is going to take regarding taxes on petroleum products will be contained in the Finance Bill, which I will table before the conclusion of this Parliament sitting,” said Dr Mgimwa.

In their contributions, many MPs pressured the government over the decision to increase tax and levies on fuel, noting that if the taxes were to be implemented as had been proposed, countering inflation will be difficult. 

But, in his response, Dr Mgimwa reminded legislators that the decision to modify fuel taxation was taken in 2012 as a way of controlling fuel adulteration and from the feedback the move has worked.

“We have made some adjustments to this year’s proposals on fuel taxes and levies but the changes still take into consideration the need to control adulteration,” he said.

In the Budget which he presented to Parliament on 13 June, this year, Dr Mgimwa requested the law makers to grant the green light to increase excise duty on diesel by Sh2 per litre from Sh215 to Sh217.

He also asked for parliament’s  approval to raise excise duty on petrol from Sh339 per litre to Sh400. He also sought to amend Road Fund and Fuel Tolls Act by increasing fuel levy by Sh63 from Sh200 to Sh263 per litre.

This move, according to Dr Mgimwa, aimed at raising funds to enhance the government capacity to rehabilitate road networks in the country. If the increase was accepted by Parliament, Dr Mgimwa hoped to collect Sh155.89 billion.

Also Dr Mgimwa announced the introduction of petroleum levy, to be charged at the rate of Sh50 per litre and to be collected by Tanzania Revenue Authority (TRA). The money from the new levy will be used to finance rural electrification projects through Rural Energy Agency (REA).

But Finance minister was adamant to his proposal on the pay as you earn (Paye) which he pegged at 13 per cent to people who earn between Sh2.04 million and Sh4.32 million per year.

Many MPs had pressured the government to reduce the percentage further in order to enable Tanzanians in the low income bracket to get more from their salaries.