Tanzania’s 1995/96 budget was unexciting but did clearly aim to win some popularity for the government prior to the elections. The minimum wage was raised and duties on imported foodstuffs and clothing were reduced. The transport sector was hit hard.
The budget proposed a 14.2% increase in expenditure on last year to Shs 627,688 million – Shs 184.7 million foreign component; Shs 27 million in bank loans. Minister for Finance Jakaya Kikwete said he was assuming that the February pledges of $1 million from donors would be fulfilled. Tax exemption on most capital goods and services enjoyed by foreign investors would be abolished but other tax rates would be adjusted to compensate. Planning Minister Horace Kolimba said that the government would no longer accept foreign aid involving foreign experts; projects would be implemented by Tanzanian experts.
Targets for next year, which many observers considered unrealistic, included a GDP growth of 5%, reduction of inflation to 15%, repayment of Shs 26.8 billion to banks and a self-financing budget by 1997/98. More realistic targets included increasing export levels from $505 million to $606 million.
* Minimum wage for civil servants raised from Shs 10,000 to Shs 17,500 per month and not taxed; minimum pension to retirees to be raised to Shs 2,000 per month;
* Tax exemption for imports abolished to curb tax evasion; as compensation capital goods and industrial raw materials would be charged only a flat 5% duty instead of 30%; tax holidays intact;
* Sugar, rice, cooking oil and wheat products – 20% import duty (compared with about 50%) and 5% sales tax compared with 30% before; duty on imported clothes reduced from 50% to 30%;
* road toll levy on petrol and diesel up from Shs 40 per litre to Shs 50;
* Vehicle registration fee up from Shs 50,000 to Shs 75,000;
* Foreign companies to pay 20% of profits after tax as ‘branch withholding tax’; corporation tax to be 35% for all (down from 40% for foreign firms);