Tanzania ‘is not ready’ to refund sugar import duty

Tuesday April 17, 2018

By Tranquility News Correspondent, Dar es Salaam

Tanzania is reluctant to divulge factors leading its delay to reimburse Sh35 billion (about $16.6 million) worth accumulative extra duty it owes local industrial sugar importers despite a directive from the East African Community (EAC) to do so eight months ago.

Since industrial sugar is not locally produced in the region, the EAC allowed local manufacturers of beverages, food and pharmaceutical products to import the raw material under the bloc’s duty remission scheme in 2015.

The agreed import duty for industrial sugar to all EAC partner states though is 10 per cent; Tanzania has been charging an additional refundable import duty of 15 per cent.

The Tanzania government defends itself, saying the additional charge aims at curbing misuse of industrial sugar by unscrupulous traders who sell the raw material in the local market for domestic use.

It also introduced an Escrow Account during the 2017/2018 financial year for industrial users to deposit the 15 per cent with an intention of fast tracking the refund process.

The Confederation of Tanzania Industries (CTI) cried foul on behalf of key players in industrial sugar to the EAC Secretariat through the East African Business Council (EABC), leading the regional body to direct the country to reimburse the refunds.

The EAC Director General for Customs and Trade, Mr Kenneth Bagamuhunda, orders the Tanzania’s Permanent Secretary in the Ministry for Finance and Planning, Mr Dotto James, in his August 24, 2017, letter to expedite the refund claims on the deposit on imported sugar for industrial use by approved manufacturers.

The East African Community Director General for Customs and Trade, Dr Kenneth Bagamuhunda.

Dr Bagamuhunda clarifies in the letter that the purpose of trade facilitation and in reference to section 107 of the EAC Customs Management Regulations (CMA), importers are required to furnish security in form of bond instead of cash deposit.

He orders Tanzania to amend regulation 104A (1) of the Tax Administration (General) (Amendment) Regulations, 2017, by deleting words ‘additional import duty payable on importation of industrial sugar’, saying the payment is cash deposit, not an additional import duty.

“Note that any import duty applicable is governed by the EAC Common External Tariff (CET) and the EAC CMA which take precedence over similar national laws,” the EAC letter to Tanzania government says.

However, eight months after the EAC Secretariat’s directive, Tanzania authorities have not yet paid the manufacturers yet, prompting the CTI to amplify its voices.

Tranquility News attempts to find out technical glitches inhibiting payment of the refunds proved futile, as the Tanzania’s Permanent Secretary in the Ministry of Industry, Trade and Investment, simply said “not yet”.

The Tanzania Government’s Spokesperson, Dr Hassan Abbas, was also tight-lipped, directing Tranquility News to the ministry. “Despite the mandate I have, you’ve to consult the ministry to know exact technicalities delaying the payment,” Dr Abbas said.

The Tanzania Revenue Authority (TRA) Director for Taxpayer Services and Education, Mr Richard Kayombo, also declined to comment on the matter, saying the ministry is responsible for the task.

Outgrowers inspect a sugar cane farm belonging to their fellow farmer after elephants destroyed the crop in Kiombero District, Morogoro Region, Tanzania. The country and other East African Community partner states import industrial sugar, which is not produced at all in the region. PHOTOS | AGENCY

CTI has been calling upon the TRA to remit the Sh35 billion ($16.6 million) in industrial sugar unpaid refunds to five big industries, saying any continued delay is likely to suffocate the operations of the respective factories.

The CTI Chairman, Mr Samuel Nyantahe, once told a news conference in Dar es Salaam that the belated refunds of the additional 15 per cent import duty on industrial sugar was threatening imminent closure of industries.

Food, beverage and pharmaceutical industries are the main users of industrial sugar for production processes in the country.

“CTI has for a long time been advocating for the removal of the additional 15 per cent on imported industrial sugar, as it does not increase government revenue, but it rather increases the cost of doing business to manufactures,” he said.

The additional 15 per cent refundable import duty is an administrative burden to both industries and the government itself, the CTI chairman said.

The manufacturers’ cash flow has been tied up completely, as they do not earn interest on delayed refunds and instead continue paying interest on overdrafts they have to take to cover the additional cost.

Over Sh3 billion ($1.3 million) has been cumulatively paid as banks interest by December last year, Mr Nyantahe explained.

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