Legal Digest – July 2015

Parliament to be dissolved in July 2015

The President shall be addressing the National Assembly on 9 July 2015 after which parliament business will come to an end and parliament will be dissolved. On the 12 July 2015, it is expected that the ruling party, CCM, will announce its candidate for President for the October elections. CCM members who are vying for nomination in their constituencies will also be picking their forms mid-July which will be followed by campaigns for nomination.

Budget

This years’ budget focus was on election financing, rural electrification, water supply, completing ongoing strategic projects as well as investing in human resources.
The budget aims at attaining single digit inflation, a stable currency, and an increase in revenue collection. The current budget intends to control Government spending, control money supply, and attract larger investments.

The Government budget for 2015/2016 is TZS 22,495.5 billion with tax and non-tax revenues amounting to TZS 13,475.6 billion equivalent to 14.3% of GDP. Out of this amount, tax revenues are expected to be TZS 12,363 billion and non-tax revenues of TZS 1,112.7 billion.

Revenue to be collected by the local councils are expected to be TZS 521.9 billion equivalent to 0.6% of GDP.

Proposed changes in law

Income Tax Act, Cap 332

• Remove tax exemptions on government projects that are financed using non concessional loans, except for those projects that had such exemptions in place prior to 1 July 2015. These projects shall continue enjoying such exemptions.
  Reduction in PAYE for the lower bracket from 12% to 11%.
• Reduction in the income tax rate for small businesses to promote voluntary tax compliance.

Value Added Tax (VAT)

• The new law on Value Added Tax (VAT) will take effect from 1 July 2015. As of 30 June 2015 regulations under this new VAT Act had not been issued.
• The government has waived taxes on essential goods such as inputs, agricultural tools, fishing tools, medical devices as well as all of the capital goods.

Vocational, Education and Training Act, Cap 82

• Reintroduce exemption to the VETA fund by those in the agricultural sector.

Tanzania Investment Act, Cap 38

• To attract large investors who may require specific tax exemptions, a new category of ‘Special Strategic Investment’ projects will be introduced with the following criteria: (1) investment of at least USD 300M; (2) local insurance being utilised; (3) the project being able to directly employ at least 1,500 people including top management and (4) project being able to generate foreign exchange by either exports or reducing dependence on items that are currently being imported.
• Cancellation of exemption provided by TIC on trailers so as to encourage local trailer manufacturing.

The Road and Fuel Tolls Act, Cap 220

• Increase in fuel levy for both diesel and petrol from TZS 263 to TZS 313 per litre. The additional funds from these two products are to be utilised in the Rural Electrification project.

Petroleum Act 2015

A Petroleum Act that combines the Petroleum (Exploration and Production) Act 1980, the Petroleum Act 2008 and the Gas Bill sailed through parliament. The Act combines upstream, midstream and downstream operations of the oil and gas sectors. The Act has come under increasing criticism for not having been circulated on time and not having had any stakeholder consultation.

Tanzania Extractive Industries (Transparency and Accountability) Act 2015

The Tanzania Extractive Industries (Transparency and Accountability) Act 2015 was passed by parliament in the first week of July. This Act covers both mining and the oil and gas sector.

The purpose of the Act is to ensure transparency and accountability in the extractive industries and to better regulate and reconcile payments between such companies to statutory bodies in Tanzania. The Act establishes a Committee that shall be an independent Government entity which shall be an oversight body for promoting and enhancing transparency and accountability in the extractive industry. The Chairperson of the committee shall be appointed by the President.
Mining and oil and gas companies will be required under this Act to file further returns and provide more information to the committee on their financial affairs including spending on corporate social responsibility.

The finer details on how the committee will operate will be published by way of rules and regulations, whose drafting we are informed is yet to be completed.

The Oil and Gas Revenues Management Act, 2015

This legislation provides for the establishment and management of the Oil and Gas Fund, to provide for the framework for fiscal rules and management of oil and gas revenues and to provide for other related matters.

Under this legislation, the TRA will continue with its role taxing the oil and gas companies, but all non tax oil and gas revenues will be collected and accounted for by the National Oil Company.

The Petroleum Upstream Regulatory Authority, as is expected to be formed vide the Petroleum Act, will be responsible for auditing cost recovery to ensure that the government is getting its share as per legislation and production sharing agreements.

The legislation forms the Oil and Gas Fund, whose objectives shall be to ensure that: (a) Fiscal and macroeconomic stability is maintained (b) the financing of investment in oil and gas is guaranteed (c) Social and economic development is enhanced, and (d) Resources for future generations are safeguarded.

Contribution to Workers Compensation fund

Beginning 1 July 2015, employers in Tanzania are subject to the Workers Compensation Fund. The details are now as below:

1. Employers should remit contributions to the fund through either NMB Bank or CRDB Bank.
2. There is a new form to be filled out- Form no. WCP-1 to support the remitted contributions.
3. Monthly contributions shall be 1% of employer’s monthly cash sums paid to employees in the private sector and 0.5% of employer’s monthly wage bill for employers in the public sector.
4. It is important to observe that all employers are statutorily required to contribute to the Fund. These contributions form part of employer’s cost and not be deducted from salaries of employees.

Act to protect graft whistle blowers

Individuals exposing corruption and abuse of office will now be protected and rewarded under a new law, The  Whistleblower and Witness Protection Act, which aims to insulate the whistleblowers from victimisation.
The Act puts in place a mechanism for the protection, rewarding and compensating of whistleblowers and witnesses.
Under the Act, whistleblowers are allowed to disclose the wrongdoing in writing, sign language or orally and in case their life, property or jobs are endangered, the government will protect them against such threats.

If any person divulges any information relating to the identity of the whistleblower, the Act says they commit an offence and shall be liable to at least three-year imprisonment or a minimum fine of TZS 5 million or both.

And for the authority that will ignore the information disclosed, the Act states: “Any competent authority who fails to take an action in relation to the wrongdoing reported by a whistleblower and as a result of that failure he occasions loss to a public institution, commits an offence and shall, upon conviction, be liable to imprisonment for a term of not less than 18 months or to a fine of not less than TZS 3 million or to both.”

Those qualifying for protection are whistleblowers who give information in good faith with a reasonable cause to believe that the information they give or allegation of wrongdoing they level is substantially valid.