Tanzania’s stakeholders in the transport sector have hailed the government’s decision to scrap Value Added Tax (VAT) on transit cargo, saying the measure will no doubt increase volume of consignments destined for landlocked countries at Dar es Salaam Port.
They said that the move by the government was indeed welcome as it will help lure transporters to use the country’s major port, hence reinstate lost job opportunities. However, they were quick to issue caution, saying the increase in volume of cargo at Dar es Salaam Port may not be quickly seen.
Dr Hildebrand Shayo, an economist, spoke to the ‘Daily News on Saturday,’ issuing caution that some international companies that transport containerised items must have entered contracts with receivers to use ports that had no VAT on transit cargo.
“Operationally, these international transport companies tend to enter what is known as pre-shipment contracts with receivers. These contracts that are legally binding stipulate clearly the ports of choice to be used,” he said.
“Given the fact that Tanzania had slapped VAT on transit cargo these companies might have skipped Dar es Salaam Port in their contracts in favour of other ports.
Therefore, we may be required to wait for such contracts to expire before we see changes in terms of volume of cargo at our port and this may take three to four months,” he added. Such contracts, according to Dr Shayo also tend to clearly state penalties that receivers may be liable to pay if they violate them.
Owners of trucks in the country through their body - Tanzania Trucks Owners Association (Tatoa) - also expressed joy at government’s decision, saying indeed it responded positively to a number of issues they were crying for.
“First, we congratulate the government for giving the transport sector this special and huge consideration in this new budget,” Tatoa President Angelina Ngalula said. According to Ms Ngalula, zero rating of VAT on the ancillary transport service on transit goods will trigger increase in volume of transit cargo destined for landlocked counties and also complement government efforts in building the new railway and roads.
Ms Ngalula also spoke on the abolition of annual motor vehicle licence fee, saying that it was an enormous and unbearable nuisance for the transportation sector. “We highly thank the government for abolishing this fee, including granting amnesty to those who owed the Tanzania Revenue Authority (TRA).
This will also help us to manage time,” she stated. She said that vehicle licence fees have been a major contributor to time wastage along the road because police and Yono Auction Mart have been frustrating them by stopping trucks on the road for inspection.
“If they notice during inspection that you have another truck either running or not running but unpaid for, they just impound the one with a valid licence plus its cargo before asking you to go and clear arrears,” she said.
According to her, abolition of motor vehicle licence fees had to them in terms of time management. Tanzania Freight Forwarders Association (TAFFA) praised President John Magufuli and his entire government, saying he has indeed shown that he is a man of the people, especially the commoners.
“I sincerely congratulate and thank President Magufuli for the decision he has made. He has shown that he listens to his people and he loves Dar es Salaam Port, “ TAFFA Secretary General Tony Swai told the ‘Daily News on Saturday’ when reached for comment.
Swai said the abolition of VAT on transit goods will act as a catalyst to speed up the return of importers who were avoiding Dar es Salaam Port. “Today, I spoke to Commissioner General of Rwanda Revenue Authority Tusabe Richard.
During the conversation he expressed joy for the decision and he congratulated our government,” Swai said. “The government has now given us the farm (Dar es Salam Port).
Our responsibility is to nourish it so that we harvest more,” he spoke in parables, meaning that the government has now given them an opportunity to convince businessmen in landlocked countries to use the port after abolition of the tax.
He said that he was confident that the government’s decision will have a spillover effect on other economic activities.
The Confederation of Tanzania Industries (CTI) also added their voice, saying zero rating of VAT on the ancillary transport service on transit goods will help reduce transport cost on the cargo passing through Dar es Salaam Port.
“The measure will have positive impact on the economy as more cargo will be transported via Dar es Salaam Port,” CTI said.