PAYE cut hailed as good start

ABDUEL ELINAZA

The Association of Tanzania Employers (ATE), Executive Director, Dr Aggrey Mlimuka.

SEVERAL experts and labour sector stakeholders have said the two per cent tax reduction on Pay As You Earn (PAYE) is a good beginning though its effect on disposable income is insignificant.

The experts on the field said the move, apart from being a good start, would also increase tax-paying compliance and reduce cost of doing business. President John Magufuli on Sunday promised PAYE reduction of 2 per cent across the board during this year’s May Day (Workers Day) held at national level in Dodoma.

The Association of Tanzania Employers (ATE), Executive Director, Dr Aggrey Mlimuka, said they welcomed any tax reduction on salaries since it would lessen the cost of doing business. “Generally, it’s a good beginning.

Job seekers normally negotiate for net pay and we add up taxes and other charges on top of that. So minus 2.0 per cent is good for us,” Dr Mlimuka observed.

Though, he said, they are waiting for the final calculation to see how it translates in figures on Finance Bill and challenged the government to reduce even Skills Development Levy (SDL). “Tax reduction on those areas increase compliance as well,” Dr Mlimuka added.

Trade Unions Confederation of Tanzania (TUCTA) Secretary General (SG) Nicholas Mgaya told the ‘Daily News’ that Dr Magufuli’s government drive to deal with inefficiency and corruption at the end of day stands to facilitate an increase in salaries.

“At least we (TUCTA) see light at the end of the tunnel on workers’ benefits and salaries hike ... we might get a salary increase this year or next year,” Mr Mgaya said. The TUCTA SG said irrespective of the amount being small, it was something as “this is just the beginning and practically, it is a good gesture.”

According to Mr Mgaya, the PAYE cut is across the board from the lowest to highest paid workers and that the reduction is automatically on excise charges. University of Dar es Salaam (UDSM)’s Professor Haji Semboja said that the amount returned to workers as tax reduction and its impact on economy was insignificant.

“At a quick glance, this means the government has increased (workers’) purchasing power by two per cent ... it’s something ... but not that much,” the senior economist said. He said the coming government budget 2016/17 might increase taxes by 20 per cent, this knocks off the 2.0 per cent relief to workers.

Dr Semboja said he was not supporting the president’s move of lowering the amount paid to heads of public institutions and instead the drive should be to increase salaries of lowly-paid workers.

Another economist, Professor Honest Ngowi from Mzumbe University’s Dar es Salaam Campus, said the 2.0 per cent tax-cut on salaries at the end of day poised to be chopped off by inflation, exchange rate and consumable tax increase in the 2016/17 budget.

“(The PAYE cut) is like you are giving by one hand and taking by another hand ... given the fact that the next 29.3 trillion/- budget is full of tax hikes,” Prof Ngowi noted. On the lowering of public institutions’ high perks, Prof Ngowi said he was against the move since it is ‘bad economics.’

“The economy will see a brain drain surge as our sons and daughters in the Diaspora won’t return for 15m/- (some 7,500 US dollars) salary. It will be very rare to get them.”

A quick calculation by the ‘Daily News’ shows that those in the lower brackets; between 170,000/- and 360,000/- will get a relief of 3,800/-; between 360,000/- and 540,000/- will have a 7,400/-relief, while those getting between 540,000/- and 720,000/- will get 11,000/-.

For those on the higher end; above 720,000/-, their PAYE would drop to 28 per cent from 30 per cent depending on the amount one gets. For instance, a salary of 1.5m/- will have 26,600/- relief.