Dar es Salaam. The Tanzania Private Sector Foundation (TPSF) has expressed concern about the new value-added tax (VAT) deferral policy, claiming that it may raise import costs and impede new investments, particularly in manufacturing.
VAT deferral allows businesses to postpone paying VAT on imported machinery and equipment (capital goods). This helps with upfront costs associated with setting up or expanding operations.
According to the policy brief issued by the TPSF, previously, as prescribed in the tax laws, importers were enjoying relief for all plants and machinery that had not been procured for resale if their respective VAT exceeded Sh10 million.
The policy was also applied when the capital good is procured to conduct an economic activity that generates a turnover of at least 90 percent of taxable (vatable) supplies.
However, the changes made in the Finance Act 2023 ended the VAT deferment regime for imported capital goods.
According to the TPSF, the act ceases the application of Section 11 of the Value Added Tax Act, Cap. 148, on imported capital goods by June 30th, 2026.
“This will mean the VAT deferral regime will no longer apply to imported capital goods. Therefore, investors looking to benefit from the existing VAT deferment regime must make their imports before the specified deadline (June 30, 2026),” the TPSF policy brief read in part.
Another key change from the new Finance Act entails amending the principal Act to extend VAT deferral benefits to locally manufactured capital goods while subjecting investors to the same eligibility criteria.
The envisioned rationality is to boost the domestic industrial base by creating a facilitative regime or environment for investors who wish to manufacture capital goods.
Speaking to The Citizen, TPSF’s head of research and policy advocacy, Mr Kennedy Rwehumbiza, said there is a policy shift dilemma in the private sector about whether the incentive being extended to investors when procuring locally manufactured goods will have the intended outcome.
“Prospects show that even with the extension of the incentive (VAT deferment) to locally manufactured capital goods (plants and machinery), the imported ones will remain competitive, thus defeating the purpose of the proposed policy,” he said.
According to Mr Rwehumbiza, it’s the private sector’s view that the government should first reconsider the timeline of 2026 for a new VAT deferral regime, as well as reform the new policy by revising the amount that is eligible for deferment.
“Rather than discontinuing the regime entirely on imported capital goods, stakeholders could reach a consensus to marginally raise the VAT component per unit of imported capital goods, commencing at Sh20 million or another figure exceeding Sh10 million based on importation data,” he said.
The stakeholders had also proposed extending the VAT deferment to agents of foreign manufacturers of capital goods. This extension would allow for the associated benefits to be extended and would promote the attraction of businesses, particularly dealers.
Mr Rwehumbiza explained that some companies have principals located outside of the country, and as a result, direct purchases from local agents currently deny access to the VAT deferment regime.
He emphasised that implementing this measure would not only promote employment but also enhance domestic revenue mobilisation.
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Air Tanzania Banned From EU Airspace Due to Safety Concerns
Several airports have since locked Air Tanzania, dealing a severe blow to the Tanzanian national carrier that must now work overtime to regain its certification or go the wet lease way
The European Commission has announced the inclusion of Air Tanzania on the EU Air Safety List, effectively banning the airline from operating in European airspace.
The decision, made public on December 16, 2024, is based on safety concerns identified by the European Union Aviation Safety Agency (EASA), which also led to the denial of Air Tanzania’s application for a Third Country Operator (TCO) authorisation.
The Commission did not go into the specifics of the safety infringement but industry experts suggest it is possible that the airline could have flown its Airbus A220 well past its scheduled major checks, thus violating the airworthiness directives.
“The decision to include Air Tanzania in the EU Air Safety List underscores our unwavering commitment to ensuring the highest safety standards for passengers in Europe and worldwide,” said Apostolos Tzitzikostas, EU Commissioner for Sustainable Transport and Tourism.
“We strongly urge Air Tanzania to take swift and decisive action to address these safety issues. I have offered the Commission’s assistance to the Tanzanian authorities in enhancing Air Tanzania’s safety performance and achieving full compliance with international aviation standards.”
Air Tanzania has a mixed fleet of modern aircraft types including Boeing 787s, 737 Max jets, and Airbus A220s.
It has been flying the B787 Dreamliner to European destinations like Frankfurt in Germany and Athens in Greece and was looking to add London to its growing list with the A220.
But the ban not only scuppers the London dream but also has seen immediate ripple effect, with several airports – including regional like Kigali and continental – locking out Air Tanzania.
Tanzania operates KLM alongside the national carrier.
The European Commission said Air Tanzania may be permitted to exercise traffic rights by using wet-leased aircraft of an air carrier which is not subject to an operating ban, provided that the relevant safety standards are complied with.
A wet lease is where an airline pays to use an aircraft with a crew, fuel, and insurance all provided by the leasing company at a fee.
Two more to the list
The EU Air Safety List, maintained to ensure passenger safety, is updated periodically based on recommendations from the EU Air Safety Committee.
The latest revision, which followed a meeting of aviation safety experts in Brussels from November 19 to 21, 2024, now includes 129 airlines.
Of these, 100 are certified in 15 states where aviation oversight is deemed insufficient, and 29 are individual airlines with significant safety deficiencies.
Alongside Air Tanzania, other banned carriers include Air Zimbabwe (Zimbabwe), Avior Airlines (Venezuela), and Iran Aseman Airlines (Iran).
Commenting on the broader implications of the list, Tzitzikostas stated, “Our priority remains the safety of every traveler who relies on air transport. We urge all affected airlines to take these bans seriously and work collaboratively with international bodies to resolve the identified issues.”
In a positive development, Pakistan International Airlines (PIA) has been cleared to resume operations in the EU following a four-year suspension. The ban, which began in 2020, was lifted after substantial improvements in safety performance and oversight by PIA and the Pakistan Civil Aviation Authority (PCAA).
“Since the TCO Authorisation was suspended, PIA and PCAA have made remarkable progress in enhancing safety standards,” noted Tzitzikostas. “This demonstrates that safety issues can be resolved through determination and cooperation.”
Another Pakistani airline, Airblue Limited, has also received EASA’s TCO authorisation.
Decisions to include or exclude airlines from the EU Air Safety List are based on rigorous evaluations of international safety standards, particularly those established by the International Civil Aviation Organization (ICAO).
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The process involves thorough review and consultation among EU Member State aviation safety experts, with oversight from the European Commission and support from EASA.
“Where an airline currently on the list believes it complies with the required safety standards, it can request a reassessment,” explained Tzitzikostas. “Our goal is not to penalize but to ensure safety compliance globally.”
Airlines listed on the EU Air Safety List face significant challenges to their international operations, as the bans highlight shortcomings in safety oversight by their home regulatory authorities.
For Air Tanzania, this inclusion signals an urgent need for reform within Tanzania’s aviation sector to address these deficiencies and align with global standards.
The path forward will require immediate and sustained efforts to rectify safety concerns and regain access to one of the world’s most critical aviation markets.
Source: allafrica.com
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