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WORLD BANK SOFTENS AS VAT ACT CHANGES DUE "Credit News 24"

Ms Bella Bird, the World Bank Country Director for Tanzania, Somalia, Malawi and Burundi.

The World Bank (WB) has promised to support the government with the current and future portfolio following the decision to amend the current Value Added Tax Act of 2015.

While on a recent Tanga Region tour, President John Magufuli said that it was irrational to impose VAT on everything, especially soft loans and grants, as it was slowing down development projects.

He, however, directed the office of the Attorney General (AG), Finance Ministry, Regional Administration and Local Government and other responsible ministries, to fast-track the amendment of the VAT Act 2015, a move he said would attract more donors and soft loans, including WB.

Responding to ‘Daily News’ enquiries over Dr Magufuli’s directive, Ms Bella Bird, the World Bank Country Director for Tanzania, Somalia, Malawi and Burundi, said the Bretton Woods “is pleased to have clarity on this matter - which concerns the resources that the government of Tanzania borrows from us.”

As the government is expected to present the amendment of the section of the VAT Act during the next Parliamentary session, in compliance with the President’s directive, the WB boss said the institution would show support under the arrangement.

“We look forward to supporting the Government of Tanzania with the implementation of our current and future portfolio under this arrangement,” the director responded after ‘Daily News’ sought to know if the WB would increase more support for development projects after the anticipated amendment.

The existing VAT Act was enacted to fill the vacuum left by the previous VAT Act of 1997 as the government was focusing on reduction of exemptions and special relief in order to improve revenue collection.

During the launch of the modern 4bn/- Korogwe bus stand in Tanga Region earlier this month, he said his government had learned that “it was irrational to impose VAT on everything, especially soft loans and grants.” He remarked:“In 2015, we made amendments that lead to imposition of VAT on everything.

These changes have affected us immensely. When we negotiated with the World Bank (WB) on this project (Korogwe Bus Stand) the amendment hadn’t been effected.

“I have directed the AG, Regional Administration and Local Government and other responsible ministries to fast-track the amendment of the section of the VAT Act during next month’s Parliamentary session,” Dr Magufuli said at the occasion.

Dr Magufuli pointed out the seizure of imported materials for the Dar es Salaam-Morogoro Standard Gauge Railway (SGR) was how the current VAT Act operates, saying it was decelerating development projects.

He ordered the release of the materials as the government was awaiting the amendment in September, this year. The Head of State pointed out that when VAT was imposed on development projects funded under soft loans or grants from development partners, the government suffered immensely because it had to raise money to pay taxes.

Another effect of the existing VAT, the President added, was the health sector, whereby it was difficult for donors to donate health facilities that could help people because they were tasked to top-up the required tax or for the government to raise the amount.

“The donors give you something for free, and then you demand that they pay tax… this is sheer nonsense,” said the President, as he stressed the need for amendment of the 2015 VAT Act.
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