CTI_Newsletter_Issue_148 - Confederation of Tanzania Industries

Monthly Newsletter of the Confederation of Tanzania IndustriesM o n t h l y Ne w s l e t t e r o f t h e C o n f e d e r a t i o n o f Ta n z a n i a I n d u s t r i e sISSUE NO. 148 ISSN NO. 0856 - 8146 APRIL/MAY, 2010INSIDEWhy CTI Did Not Support the Planned Workers’ Countrywide Strike 6CTI Requests Members’ Participation in PMAYA 2010 CompetitionThe Voice of Industry1www.cti.co.tz8

Monthly Newsletter of the Confederation of Tanzania IndustriesCONTENTSCTI’s Tax Proposals for 2010 AddressChallenges Faced by the ManufacturingSector in Tanzania 4Why CTI Did Not Support thePlanned Workers’Countrywide Strike 5CTI Requests Members’ Participationin PMAYA 2010 Competition 8Trade Fairs & Exhibitions 10EDITORIAL MEMBERSCHAIRMAN OF EDITORIAL BOARDDr. Samuel NyantaheEDITORMrs. Christine KilinduMEMBERMr. Thomas KimbungaThe Voice of Industry is Published by:The Confederation of Tanzania Industries (CTI)9th Floor, NIC Investment House,P.O. Box 71783 Dar es Salaam, TanzaniaTel: +255 22 2114954, 2123802, 2130327Fax: +255 22 2112414E-mail: cti@cti.co.tzWebsite: www.cti.co.tzThe Voice of Industry3www.cti.co.tz

Monthly Newsletter of the Confederation of Tanzania IndustriesCTI’s Tax Proposals for 2010 AddressChallenges Faced by the ManufacturingSector in TanzaniaIn a bid to improve thecompetitiveness of Tanzaniamanufacturers in both domesticand international markets, theConfederation of Tanzania Industries(CTI) has submitted to the TaskForce on Tax Reforms, tax proposalswhich aim at addressing thechallenges faced by manufacturersduring the past year.The Confederation noted that theperformance of the sector last yearwas slightly unsatisfactory. It has beenin 2009. The country’s export earningsdeclined from 26% of the total exportearnings in 2008 to 19.0% in 2009and formal employment declined from92,015 to 88,415 during the period.CTI points out that the performanceof the manufacturing sector wasconstrained by many challenges like thefinancial and economic crisis; increasedimportation of subsidized productssuch as cement and textiles mainlyfrom the Far East Asian countries;power rationing; poor infrastructures,administration by the central and localgovernments plus poor performanceof Tanzania in the World Bank DoingBusiness Report under ‘paying taxes’criteria.As a result, the Confederation ofTanzania Industries’ submissionaims at accelerating growth of themanufacturing sector by 10%;enhancing export earnings above 25%;increasing employment from about88,415 in 2009 to 95,000 during 2010.Likewise, it aims at simplifying taxadministration proceduresas paying taxes was one ofthe areas which adverselyaffected Tanzanias’ positionin the World Bank Report onDoing Business. It also aimsat increasing governmentrevenue to financeinfrastructure developmentprojects.The Chairman of CTI Mr. Felix G N Mosha in consultation with Past Chairmen Mr.Reginald A Mengi (right) and Mr. Arnold B S Kilewo (centre)established that the sector’s growth ratedeclined from 9.9% in 2008 to 9.5%including congestion at Dar es Salaamport, dilapidated central railway andin 2009 and its contribution to GDP roads. Other challenges includeddeclined from 9.4% in 2008 to 9.2% cumbersome procedures for taxFollowing the same patternused in the past, CTI’sPre-Budget Proposals weredivided into two maincategories: Cross-CuttingIssues and Company/Sector-Specific Issues. Cross-Cutting proposals revolvearound those issues whichaffect the entire economy,while company- specificproposals encompass proposals thataffect specific companies or a givensub-sector of the economy. This year,the Confederation submitted five CrossThe Voice of Industry4www.cti.co.tz

Monthly Newsletter of the Confederation of Tanzania IndustriesCutting Issues to the Government.First was the reduction of ExciseDuty on HFO from TZS 109 to TZS0 per litre in phases over three (3)years. This was intended to enhancecompetitiveness of industries, as HFOis an input in heavy industries and nota final product. Abolishing the duty asproposed would generate more revenueto the government due to increasedproduction. Its abolition would meanthat Tanzanian products would beable to compete more effectively withsimilar products from other EastAfrican countries as no country in theregion charged Excise Duty on HFO.The second cross-cutting proposal wasreduction of Skills and DevelopmentLevy (SDL) from 6 per cent to 4 percent in 2010/2011 and 2 percent in2011/2012. It has been proposed toextend payment of SDL to parastatals,government agencies and all institutionsof commercial nature. CTI argues thathigh SDL discourages employment onpermanent bases and it is perceived bythe private sector as non transparentand a hidden tax. Confining it to theprivate sector is viewed as penalizingemployers in the private sector asparastatals and agencies doing businessare not charged. It also reduces thecompetitiveness of local industries.The third proposal which was submittedto the Task Force was the removal ofVAT on rented private houses in orderto encourage construction of more goodhouses and to remove discriminationamong tenants occupying NHChouses and those dwelling in privaterented houses. The tax is viewed asdiscriminatory because the NationalHousing Corporation does not paythe tax and it increases the burdenon people renting private houses. Italso discourages construction of morehouses for lease and thus increaseshousing problems in urban areas.The fourth proposal was theimprovement of tax administration byclose monitoring of false classification,under declaration of quantities, underinvoicingof values of imports anddiversion of tax exempt products todomestic market.On sector-specific issues, CTIsubmitted various proposals that werereceived from its members for thegovernment’s consideration. The firstsector-specific proposal was abolitionof 120% Excise Duty on plasticbags with more than 30 micronsand replacing it with a green levy of50%. This action would enhance taxcompliance, reduce cost of productionand discourage smuggling of thinmicron bags. Secondly, CTI requestedmaintenance of the current excise taxstructure on cigarettes (specific filter/non-filter) with 75% domestic tobaccocontent as it had generated a steady andpredictable tax revenue stream (Excisetax and VAT up 14% from TZS 80.4billion in 2007 to TZS 98.8 billion in2009). It is also easy to administer asit is based on a specific unit (TZS/000cigarettes).Another proposal was the phasing outof excise duty on soft drinks over 5years. This is because soft drinks areclassified as mass market consumptiongoods, tax induced market distortionand volume growth to compensateapparent revenue loss. Furthermore,CTI proposed reinstating of 10%import duty on pharmaceuticals inorder to increase government revenueand enhance competitiveness oflocal pharmaceutical industry. It alsorequested the reduction of importduty of 10% to 0% on pharmaceuticalpackaging materials to enhance thecompetitiveness of local pharmaceuticalindustry, create a level playing field andencourage more investments.In respect of the paper convertingindustry, the Confederation urgeda reduction of import duty on kraftliner for paper convertors from 25% to10%, the reason being that these werethe raw materials for paper convertorsand Mufindi Paper Mills did notproduce them in adequate quantitiesand its products were very expensive.Its reduction would increase thecompetitiveness of local industries.For the fishing and fish processingindustry, CTI requested thereplacement of all royalties with afisheries sustainable management fundwhich would be used for sustainablefishing in order to sustain the fishingindustry. For the cement industry, theConfederation strongly recommendedthe reinstatement of the suspendedduty on cement and raising importduty from 25% to 35% or US$ 50 permetric tonne whichever was higher.It assured the government that localcapacity had increased to 3 millionmetric tonnes against a demand of2 million metric tonnes. The movewould also prevent export of jobs.CTI also submitted a proposal to zerorate VAT on exercise books printedin Tanzania and on text books. Thiswould encourage value addition locallyand reduce consumer prices. It wouldalso encourage more investment in theThe Voice of Industry5www.cti.co.tz

Monthly Newsletter of the Confederation of Tanzania Industriesmanufacturing of books and create alevel playing field between players inthe region. It urged the governmentto harmonise the VAT rate withKenya and Uganda. Furthermore,the Confederation requested theexemption of VAT on milk packagingmaterials under special relief thirdschedule of VAT Act and reductionof VAT on bread from 18% to 0%.It strongly urged the governmentto reinstate VAT special relief onpackaging for pharmaceuticalindustry and exempt VAT on“mashudu” for edible oil industry tomitigate against imports from outsidethe country. CTI also proposed zerorating or exempting VAT on fruitjuices and increasing the export levyon raw cashew nuts from 10% to15% of FOB value or US$150/MT,whichever was higher.In its concluding remarks, theConfederation urged the governmentto make policy decisions that wouldlead to the reduction of the cost ofdoing business in the country tomake the market more attractiveto investors. The Confederationexpressed the hope that the Task Forcewould consider positively its proposalsas they aimed at collecting moregovernment revenue and enhancingeconomic growth. CTI believed thatthe Public Private Partnership shouldbe based on mutual trust and expectedissues to be acted on with the aim oftaking the economy from low to highlevels of economic development. Itwas of the view that to achieve theTanzania 2025 Development Visionand Millennium DevelopmentGoals was possible and called for thegovernment to have the right policiesand priorities.Why CTI Did Not Supportthe Planned Workers’Countrywide StrikeThe Trade Union Congress ofTanzania (TUCTA) had threatened tostage a country-wide workers’ strikewhich was to start on 5th May 2010on claims that workers’ interests anddemands were ignored by employers,including the government. Workers’demands include low wages andsalaries, high taxes, poor pensionsand fringe benefits. In responseto TUCTA’s call, the Chairman ofthe Confederation, Mr. Felix G NMosha issued a Press Statementthat conveyed a clear message to theemployees and the public in generalon the side effects of the proposedworkers’ strike if it was implemented.In his statement, Mr. Mosha pointedout that there could not be a winnerin that kind of situation; it was thecountry as a whole which would lose.The implication of a workers’ strikewould have been dire to the economy.Apart from huge losses in productionin all sectors, which Tanzania couldnot afford, the Chairman said that theprevailing threat of a strike was alreadycreating uncertainty for domestic andforeign investors not just because ofthe negative effects the strike wasgoing to have on the economy, butalso, the concerns that Tanzanianswere not succeeding in evolving aculture of resolving differences throughnegotiations, which was critical tonational stability.He called on workers to be mindful ofthe current weak economy the countrywas passing through. He said thatCTI was of the view that workers andTUCTA in particular, were aware thatvarious macro-economic conditionswere showing that the performanceof Tanzania’s economy had not fullyrecovered from the global economiccrisis. For example, the GDP growthrate had declined from 7.7 per cent in2008 to around 5.5 per cent in 2009and in the case of manufacturing, thesector’s growth rate had declined from9.9 per cent in 2008 to 9.5 per centin 2009. Mr Mosha noted that thedemands that TUCTA was makingwere not without some merits, whichwas why negotiations were absolutelynecessary.The Chairman doubted the extent theplanned countrywide workers’ strikehad taken into consideration thosesocio-economic realities prevailing inthe country. Such realities includedthe recent increase of minimum wagesof TZS 120,000/- and 150,000/- permonth for civil servants and workersin the private sector, respectively andlower levels for farm workers and othercategories. He said these increases werenot achieved through any strike byworkers.Mr. Mosha expressed the view thatthe Confederation was not persuadedthat the countrywide workers’ strikeplanned by TUCTA was a solution toworkers’ problems. To the contrary,the strike would have fuelled moreproblems to workers, employers andThe Voice of Industry6www.cti.co.tz

Monthly Newsletter of the Confederation of Tanzania IndustriesThe Chairman of CTI, Mr. Felix G N Mosha addressing the press.the economy at large and jeopardisedthe government’s efforts to eradicatepoverty in Tanzania. He added thatCTI was of the opinion that there wereother acceptable ways of achievingworkers’ demands without staginga strike. After all, the planned strikewould have mostly hit innocent peoplewithin the population.The Confederation requested allworkers, through TUCTA, to callthe planned strike off and resumeroundtable negotiations for amicableand sustainable solutions. CTI was ofthe view that workers should call off theplanned strike as it was not beneficial toanybody at this time when the economywas at the early state of recovery fromthe 2009 economic recession. Equally,employers, including the government,were requested to sit together withworkers through TUCTA to negotiateand reach a consensus on salaries,wages, pension and fringe benefitsaffordable and agreeable to both partiesand agree on measures to improveproductivity necessary to sustain suchwage levels and benefits.The Chairman’s statement ended bypointing out that the Confederationdid not believe that the intention ofTUCTA was to destroy the economyor inflict undue hardship on ordinaryTanzanians who on daily basis rely onservices which a workers’ strike woulddeny them. Given that those werenot the intentions of TUCTA, such aposition made negotiations necessary,he said.He observed that each countryhad certain characteristics whichdistinguished it from others. Tanzaniadistinguished itself through its citizenswho had always solved their problemsthrough dialogue and negotiationsbecause they were politically andsocially mature. Tanzanians believedthat strikes and other mass protestswhich might lead to violent actionscould not achieve permanent solutionsto problems.Tanzanians had tolerated each other inthe past in building peace and harmonywhich citizens of this country wereproud of. He added that it was going tobe a departure from the citizens’ cultureand sense of stability if a democraticinstitution like TUCTA was going tostage a countrywide workers’ strike todemand rights which could be achievedin serious negotiations. Mr. Moshaended his statement by pointing outthat it was not too late to go back tothe negotiation table.The Voice of Industry7www.cti.co.tz

Monthly Newsletter of the Confederation of Tanzania IndustriesThe Voice of Industry11www.cti.co.tz

Monthly Newsletter of the Confederation of Tanzania IndustriesThe Voice of Industry12www.cti.co.tz