Waived VAT attracts more transit goods at Dar Port

January 16, 2018

By The Tranquility News reporter, Dar es Salaam

The Dar es Salaam Port has of late been overwhelmed with transit goods belonging to members of the business community from neighbouring landlocked countries.

Thanks to the Tanzania government for scrapping off value added tax on ancillary services extended to the goods at the port.

Tanzania International Container Terminal Services (TICTS) admitted recently that the number of containers handled at the Dar Port has increased by 35.5 per cent since the July 2017 VAT waiver.

The business community has through their umbrella orgnaisation — the East African Business Council (EABC) — been complaining over the 18 per cent VAT hurting them at the port.

The ancillary services, which attracted the 18 per cent VAT at the port, include stevedoring, lashing and securing, cargo inspection, preparations of customs documentation, container handling and storage of transit goods to be transported.

The EABC members’ outcry compelled the council to wage a vigorous campaign for the Tanzania government to waive the VAT, arguing that it was making Dar the least competitive port in the region.

The tax added unnecessary cost to owners of transit cargo, who could not claim input VAT, as they were not locally registered taxpayers, they said.

“The ultimate owners of the transit cargo were also supposed to pay VAT in their destination countries,” the EABC Trade and Policy Advisor, Mr Adrian Njau, explained.

Mr Njau blamed the sharp decrease of transit cargo shipped through the Dar es Salaam Port last fiscal year on the VAT making the port uncompetitive.

Tanzania introduced the standard VAT rate of 18 per cent to all ancillary services related to transit goods in 2015/16.

Owing to the EABC members’ outcry, however, the Tanzania government amended the Financial Act, scrapping off the ancillary services with effect from the 2017/18 Budget.

“It has made the Dar Port attractive again to members of the business community from across the East African Community partner states, namely Burundi, Rwanda and Uganda, as well as from other landlocked countries using the port, such as DRC and Zambia,” Mr Njau said.

As we work with government authorities to look for alternative storage areas, we appeal to all our customers to expedite clearance of their cargo,” – Mr Jared Zerbe, TICTS CEO

The EABC is still assessing the impact of the waived VAT on its members, he said.

TICTS registered a new monthly throughput record in August last year when the terminal handled 48,158 twenty equivalent units (TEUs), about 5 per cent increase from the record of 46,080 TEUs set in December 2015.

The TICTS chief executive officer, Mr Jared Zerbe, said the sudden rise in export transit traffic, mostly originating from the East Africa’s landlocked countries, resulted from the waived VAT.

He said the Dar Port’s market share in the landlocked countries has also increased and that the firm has extended its wings to Rwanda in a bid to market the port in that area.

The terminal storage capacity at the Dar Port has significantly decreased as a result of the increased transit cargo dwelling for a long time, he regretted.

“As we work with government authorities to look for alternative storage areas, we appeal to all our customers to expedite clearance of their cargo,” Mr Zerbe said.

TICTS is the largest container terminal in Tanzania and is a vital part of the supply chain in and outside the country, handling over 75 per cent of its trade.

The Dar Port was among 22 projects which TradeMark East Africa (TMEA) implemented between 2010 and 2017 in Tanzania when the $93 million worth TMEA country programme aimed at facilitating trade.

With its focus on reducing barriers and improving business competitiveness for trade, the 2017-2023 TMEA strategy is expected to increase the port’s handling capacity, efficiency, access via local roads and capacity for programmes management.

Going by the World Bank analysis, Tanzania’s economy would gain almost $1.8 billion a year, if inefficiencies at the Dar Port did not cost the country and its landlocked neighbours up to a staggering $2.6 billion in 2014. ends