PAYE, inflation relief plan on drawing board

HILDA MHAGAMA

THE government is committed to implement the pledge made by President John Magufuli, during his presidential campaign to reduce Pay As You Earn (PAYE) tax charged on civil servants’ salaries to improve the workers’ welfare.

Finance and Planning Minister Dr Phillip Mpango, told the ‘Sunday News ’ in an interview in Dar es Salaam at the weekend that workers should wait to see the results during the next budget.

“We will do our best to make sure, albeit slowly, that the PAYE is reduced to a single digit,” he promised. Civil servants, through their trade unions, have always been at loggerheads with the government due to the latter’s reluctance to impose substantial reduction in PAYE in workers’ salaries.

Commenting on PAYE reduction, the Confederation of Tanzania Industries (CTI) Director of Policy and Research, Mr Hussein Kamote, said it was crucial for the tax to be reduced though it might not increase workers’ morale.

“There are two things which must go hand-in-hand with PAYE reduction and salary increase, as many government workers are lowly paid thus they might not enjoy the reduction single-handedly,” he explained.

Mr Kamote further said for the reduction to have impact, it should at least reach five per cent as it depends on the amount of the salary one gets.

He observed that if the salary increases, it would assure workers once they retire of a handsome pension package and assist them at old age, adding it was crucial for the government to consider both an increase in salary and reduction in PAYE.

The Human Resources and Administration Manager of Tanzania Standard (Newspapers) Limited, Mr Joachim John, said PAYE was to a great extent a pain to many workers.

He pointed out that taxes could take even a quarter of an employee's salary as the deduction depended on the amount of the salary one got.

“It would be good if it will be reduced to a reasonable percentage as it will help increase workers’ income,” he appealed. On whether the reduction of PAYE may increase workers’ morale, he said monetary incentive might have little to do with that although it might be one of the factors.

According to Mr John, there were many factors to boost the morale of workers, including a better working environment, adding no matter how highly one was paid, if other factors were not considered, things would remain the same.

In the 2013/14 financial year, the government reduced PAYE tax from 14 to 13 per cent.

The reduction sparked outrage among workers through their trade unions, saying it was a joke, calling for further reduction during the May Day celebrations held in Mwanza last year.

For the 2015/16 fiscal year, the government again reduced PAYE by one per cent -- from 12 to 11 per cent -- to improve the lives of workers employed both in private and public sectors.

The government has been reducing the PAYE -- from 18.5 per cent in the 2006/07 financial year to 11 per cent in the 2015/16 financial year. In all campaign rallies, Dr Mafuguli has not been able to mention PAYE reduction target.