Tanzania Revenue Authority has denied that the newly introduced tax on Transit Goods has not made Dar es Salaam Port expensive. The port has of late recorded reduced cargo. TRA says the port is still cheap.
Value Added Tax (VAT) levied on auxiliary services, popularly known as VAT on Transit Goods has in the recent times been subject of criticisms from stakeholders, especially those that use Dar es Salaam Port. Introduced by the new VAT Act of 2014, the VAT on transit goods came into operation from the last financial year.
Since Tanzania’s taxman, Tanzania Revenue Authority started applying the new tax guidelines, several interested stakeholders of the Dar es Salaam port were unhappy. Their main concern was that the VAT levied on transit goods has increased the cost at the port of Dar es Salaam, hence many importers are shying away and opting for Mombasa Port as an alternative.
Mr Elijah Mwandumbya, TRA’s Commissioner for Domestic Revenue eluded a realistic situation on the ground, arguing that the Dar es Salaam port is still cheaper compared to its competitor, Mombasa port. “Let’s take an example of cargo imported through Dar es Salaam or Mombasa port to the land-locked Rwanda,” Mr Mwandumbya said.
Going by the recent data available to TRA, the importer is charged 4,169 US dollars for the 20-foot container, the cost being inclusive of VAT on auxiliary services at the port of Dar es Salaam while the same container is pays 4,465 US dollars at the port of Mombasa.
For 40-foot container that pass through the port of Dar es Salaam pays 4,123 US dollars after aggregation of all charges while the importer could pay up to 4,341 US dollars for the same container when using the port of Mombasa.. “The problem here is not about VAT at all, it’s about complications in trade, how the port could facilitate speedy handling of cargo,” he said.
Mr. Beldon Chaula, the Principal Researcher of TRA explains that the VAT is imposed on three things: services, goods and new house on sale that are used locally. According to the new VAT Act, the goods on transit pays zero per cent in tax, but services offered to the on transit goods pay VAT as long so longer as the services are offered when the cargo is still within the country.
These services include stevedoring, which is a charge on unloading or loading the cargo in a ship while lashing entails securing a loaded container on a vessel by means of bridge, bars, or rods to the whims of the captain.
Mr Chaula also says it is baseless to elude that the VAT charged on transit goods is the cause of the decline in the cargo volume at the port of Dar es Salaam, adding that the cargo fell by only 15 per cent while Kenya, which has not introduced such VAT has seen the cargo volume fall by 25 per cent for the past one year.
He links the decline of cargo in the port to the shrink in China’s export, saying that the situation has affected not only Tanzania, but the whole globe. Going by the data, China’s exports fell sharply last April, raising worries over slumping growth in the world’s second-largest economy.
China’s exports in February fell by 20.6 per cent from compared to the previous year to 821.8 billion yuan (126bn/ US dollars), according to data releasing by China’s General Administration of Customs. That’s a bigger drop than the 6.6 per cent drop the previous month.
China is now registering its lowest economic growth in 25 years after decades of breakneck expansion. Investors have expressed worries about the scale of the slump, which has offset waves of volatile trading in stocks, commodities and currencies in recent months.
