Where will revenue to fund Sh22.5tr Budget come from?

Finance Minister,Saada Mkuya . PHOTO|FILE 

By Katare Mbashiru,The Citizen Reporter

In Summary

• This question lingered in the minds of members of the parliamentary Budget Committee yesterday as Finance minister Saada Mkuya briefed the team on how the 2014/15 Budget had been funded through taxes.

Dar es Salaam. As the government prepares to present its Sh22.5 trillion ($11.25 billion) Budget for 2015/16, the biggest question is: where will the money come from?

This question lingered in the minds of members of the parliamentary Budget Committee yesterday as Finance minister Saada Mkuya briefed the team on how the 2014/15 Budget had been funded through taxes. But in the course of the briefing, it appeared that even the minister was not sure where the money would indeed come from to fund the budget apart from the traditional revenue sources – alcohol, tobacco, imported used cars, soft drinks, etc. As the sales volumes of products like alcohol and tobacco shrink, so does the government’s revenues. This means that the government will be forced to look for more revenue sources to fund the budget.

Briefing the committee, Ms Mkuya said there was a need to find more sources for cash because the traditional ones didn’t  have the desired impact in 2014/15.

This has been a well-known fact over the past decade, according to some analysts, but so far, no reliable alternative sources have been identified and fully exploited.

Even as the minister briefed the Budget Committee yesterday, she could not explain how the figure of Sh22.5 trillion was arrived at. Indeed, there is no clear road map on where the revenue would come from apart from the “usual suspects.”

The drop in sales of products that constitute traditional revenue sources followed the decision to increase excise duty by 20 per cent in the current budget.

The Confederation of Tanzania Industries (CTI) termed the increase unrealistic, and warned that regular changes and unpredictable economic policies regarding taxes would affect sales volumes, earnings and profits.

In its statement for the six months ending September 30, 2014, Tanzania Breweries Limited reported an eight per cent growth in revenues. TBL managing director Roberto Jarrin said the increase was largely driven by the pushing up of prices following the 20 per cent hike in excise duty. However, sales volumes declined for the half-year compared to the previous corresponding period as beer consumers opted for other beverages in response to the increase, which TBL passed on to consumers in July 2014.

“The majority of our brands were negatively affected by this significant increase in excise duty,” said Mr Jarrin.

Ms Mkuya confirmed this yesterday when she said drinkers opted for spirits, forcing beer companies to reduce production to cut costs. She said unlike previous financial years, revenue from juice and other soft drinks rose sharply, while revenue from alcoholic beverages went down.

The government projected to get Sh44.5 billion from imported juice, but it exceeded this target by March 2015 it had collected Sh61.5 billion.

“Beers could not give us the figures we targeted because the number of consumers went down, forcing brewers to scale back production,’’ she said. The Finance minister said in the first nine months of the 2014/15 financial year, Tanzania Revenue Authority (TRA) collected Sh7.3 trillion against a target of Sh8.4 trillion. TRA collected Sh7.2 trillion in the previous corresponding period.