Agriculture is the main stay of the majority of people, especially in the rural areas provides employment to about 70% of the total labor force. Contributes 23.7 percent of the Gross Domestic Product Contributes 34 percent of export earnings Provides 95 percent of domestic food requirement

2. General Overview of Agricultural
sector
Agriculture is the main stay of the majority of
people, especially in the rural areas
provides employment to about 70% of the total
labor force.
Contributes 23.7 percent of the Gross Domestic
Product
Contributes 34 percent of export earnings
Provides 95 percent of domestic food requirement.

3. Sector performance... Cont’d
Agriculture sector has been growing at an average rate
slightly above 4% which is above population growth of
2.8% but below Comprehensive Africa Agricultural
Development Programme (CAADP) and the Five Year
Development Plan 2011/2012 -2015/2016 envisage annual
growth rate of 6%.
No substantial contribution to the reduction of rural
poverty levels;
The decline in sector contribution to GDP is indicative of
inherent problems facing the sector.
Unpredictable policies and multiplicity taxes and levies
are among the most setbacks for the sector decline.

4. LIST IF AGRICULTURAL TAXES
Fire inspection/certificate
Health inspection (OSHA)
Water Use fee
Certificate of Conformity
Service levy
Produce cess
Plant Import Permit
Phytosanitary certificate
Radioactivity analysis
SUMATRA fee (transportation of products in
containers)
Chemical importation permit
Immigration (CTA)
Holiday/entry visa
Immigration (work Permits)
Land rent
VAT on punnets and other packaging materials
Fertilizer registration
Fertilizer testing
PAYE
Parking fees
Excise duty
Vehicle inspection fees
Fuel levy
Health inspection - LGAs
Business license
TFDA inspection fees
TFDA registration fees
Seed inspection
Variety registration
Certificate of seed testing
Certificate of seed import/export
Pension Fund
Crop inspection
Plant quarantine inspection
Skills Development Levy

5. Issue 1. Health Inspection fees:
OSHA medical examination services can cost as much as TZS 45,000 per one
worker which is to be done 3 times a year regardless of the number of workers
in the farm/business. This high rate reduces employees access to such
services. This is supported by the CAG’s report 2013 which shows that only
34% employees were inspected for health in three years period (2009-2012).
Proposal:
Reduce the inspection rate to TZS 10,000 to make them manageable to all
businesses and for the benefit of the employees safety and health in their
workplaces and hence improve compliance to the law.

6. Issue 2: Fire levy
The Law (Fire and Rescue Act Cap. 427 of 2008)
requires fire rescue services to be provided
customers/clients at their work places.
Farming activities are located very far from the fire
stations which are always in Towns and Cities, this
service is not relevant to farm operations even
though there may be such a requirement.
Proposal: Do not charge any fire service fees in farm
businesses unless such services are brought to their
vicinity.

7. Issue 3:Property Tax
In the course rural-urban reforms, there are farms which
automatically have been transformed into township.
In these farms there are houses which used to serve farm workers
accommodation
With the criteria of these houses being closer to towns, are liable to be
charged property tax.
Proposal
Exempt from property tax because they are not used for business
purposes.

8. Issue 4:Road toll (Fuel Levy)
The Government is charging road tolls/fuel levy for
farm operations while no services provided to these
farms operations in terms of road maintenance in the
farm.
This increases the cost of doing business
unnecessarily and does not reflect value for money.
Proposal:
Remove road toll for farm implements such as tractors
and other machineries because farm roads are
constructed and maintained by the businesses
themselves.

9. Issue 5:VAT Refund
Delays in VAT refund ties investment capital and
causes serious cash flow problems to companies in
the agricultural sector
Proposal
VAT refund should be effected prompt.

10. Issue 6: Produce Cess
The rate charged is too high, thus significantly increasing
cost to crop production. Farmers pay 17 times more [0.3%
vs 5%];
Pay whether enterprise made a loss or profit;
Poor administration- collection methods
• it is a disincentive to increased production
• Reduces farmers’ income;
• It distorts the market as buyers prioritize LGAs with lower
produce cess
• Is a disincentive to private sector investment;
• ,

11. Produce Cess
Proposal:
 Abolish in stages - Initially and Equalize to 0.3% of turnover
 Standardize countrywide
 Improve collection mechanism vastly.
 Reference to 2014/2015 Government Commitment to G8
JUSTIFICATION
Facilitate expansion of crop production and attract new investments
in the agriculture sector which would lead to attainment of food
security
Additional income to farmers, thus contributing to the reduction of
rural poverty.
The income to be earned will help in improving standard of living that
will contribute to the reduction of the high rate of rural-urban
migration.

12. Produce Cess
PROPOSAL FOR GOVT REVENUE DEFICIT RECOVERY
Deficit will be covered by tax from increased crop
production through corporate tax and Pay As You
Earn which will be allocated to Local Government
Authorities.
AFFECTED TAX PAYER (S)
Farmers/ Local Government Authorities

13. Issue 7: Land rent
Levy charged have been increased from Tshs. 200 to Tshs.
1000 per acre and 10,000 in urban areas. This increase will
significantly increase the cost of expanding and
establishing new large farms as large farms requires
sizable land.
Justification for proposal:
The Levy goes contrary to the commitment and objectives
of Kilimo kwanza and Big Results Now initiatives which
aim at transforming Tanzania into a low cost agricultural
products producer, a requirement for survival in the world
emerging economic environment.

14. Land Rent
Land is a Factor of Production in Agriculture
Very discriminatory [Only titled land 2% pay the tax]
Raised without a basis on how much is the turnover for
agribusinesses
Proposal
Go back to 200/= NOW. Eventually Abolish on Agriculture/
Livestock.
Ministry of Lands should not be direct beneficiary.
Let TRA the collect the land rent. Subject the Policy
Decisions to Regulatory impact Assessments (RIA) to
ensure practical policies.

15. Issue 8: Skill development Levy
The Finance Act 2013 provides for amendment to
the Vocational Education and Training Act
(Cap.82) as follows:
Section 14(2) of the Act is amended to reduce the
Skills and Development Levy from 6% to 5% of
the gross monthly emoluments payable by the
employer to all employees is respect of that
month.
Section 19 of the VETA Act which provided for
exemption from the levy was amended to provide
exemption from the levy only to any Government
department or Public institution which is wholly

16. Skill Development Levy
Ministries of Finance(MOF), Agriculture, Food
Security and Cooperatives (MAFC) and Tanzania
Revenue Authority (TRA) were approached
through meetings /letters on the issue of restoring
SDL exemption in the agriculture sector
(production).
ACT was informed that SDL exemption in the
agriculture sector (production) was erroneously
left out in the Finance Act 2014.

17. Skill Development Levy (contd)
Agreement reached was to suspend SDL charges
in all large scale production and amend the
Finance Act 2014 in November 2014.
Amendment of the Finance Act 2014 was not
effected and now has began to send charges to
the large scale farms.
Proposal
Restore SDL exemption in the agriculture sector
(production) and amend the Finance Act 2014
accordingly.

18. Skill Development Levy
Justification
According to BRN Taxation Lab held in April 2014
agriculture sector is faced by multiple taxes (about 35
different taxes). On the average these big farms use about
9 percent gross incomes in taxes. This does not include
corporate tax.
The agriculture sector does not directly benefit from
VETA services
The large farms are labour intensive (employs from 300 to
6,000 workers) therefore most farm income is used for
payment of salaries) depending on the size of the farm.

19. PROBLEM/JUSTIFICATION
The current EAC CET is not working for either consumers
or sugar producers because -
A common external tariff is not paid on all imports,
enabling importers to offer imported sugar to the market
at disruptively low prices.
Import levels exceed consumption less net domestic
supply, leading to oversupply of the EAC market, further
disrupting normal price determination.
The current CET applicable to sugar may be too high,
necessitating duty rebates in order to ensure that deficit
markets can be supplied by imports from the world
markets.
Issue 8: Sugar Chapter 17.01
CET Rate:
100% of CIF value or $200/MT whichever is higher

20. Sugar Chapter 17.01
CET Rate:
100% of CIF value or $200/MT whichever is higher
 PROPOSED TARIFF RATE(S)
 A customs duty based on a reference price system (RPS), where the duty
is calculated as the difference between a fair domestic sugar price (industry
cost of production plus a reasonable return on investment) and the world
price for sugar (NY #11 settlement price).
 A reference price system (RPS) is more stable than a local currency
reference price, as all domestic duties are calculated off the same basis.
Normally regular inflation-driven adjustments are not required, as it should
be accounted for in the exchange rates.
 The reference price should be equitable to the cost of production of EAC
produced sugar, including cost of production of sugarcane, and a fair return
on investment.
 The reference price should be calculated in local currency and converted into
US$ to compare against the NY #11 settlement price for raw sugar on the world
market.

21. Sugar Chapter 17.01
CET Rate:
100% of CIF value or $200/MT whichever is higher
The duty thus obtained will be levied in local currency.
The appropriate tariff should be applied to ALL imports to avoid
market disruption caused by duty-free imports.
Adjustments in the applicable customs duty should be triggered by
pre-determined movements in the world price for sugar (for example
if the 20 day moving average world price [NY # 11 price] for sugar
moves by more than US$ 10 over a 20 day period, an upwards or
downwards adjustment is triggered).
The impact of the reference price system (RPS) should be reviewed
annually to ensure continued effectiveness given inflationary
pressures inherent in production costs.

22. Sugar Chapter 17.01
CET Rate:
100% of CIF value or $200/MT whichever is higher
EXPECTED OUTCOME/BENEFIT
A reference price system (RPS) allows all market participants,
importers as well as EAC producers to compete at fair prices.
If set at an appropriate level, the reference price system (RPS) will
establish a preferential market for all sugar producers in the EAC, and
at the same time allows deficits to be sourced from the world market
at competitive terms.
Import-driven price volatility can be avoided by applying a reference
price system (RPS) that is responsive to changes in the world price
for sugar.
Appropriate tariff protection for the sugar industry will incentivize
production expansion and investment in downstream value addition
(sugar refining)

23. Sugar Chapter 17.01
CET Rate:
100% of CIF value or $200/MT whichever is higher
PROPOSAL FOR GOVT REVENUE DEFICIT RECOVERY
No Revenue Deficit.
As shown in Annexure 1, the Government would have
earned a total of Tshs. 238.2 billion in the past three years
(2009/10 - 2011/12) if the reference price system (RPS)
had been in place compare to total earning of Tshs. 5.7
billion generated under existing ad-valorem tariff system
AFFECTED TAX PAYER (S)
Sugar Producers/ Sugarcane growers/ Importers/
Consumers

24. Issue 9: Industrial Sugar Rate 10%
PROBLEM/JUSTIFICATION
Significant quantities of industrial sugar are imported
each year against the industrial requirement for refined
sugar enters the direct consumption market without any
industrial processing.
 When the tariff applied to sugar imports for direct
consumption is higher than the fixed tariff rate of 10% for
industrial sugar, the parties engaging in selling industrial
sugar into the direct consumption market are clearly
enjoying an unfair advantage over the domestic sugar
producers.

25. Industrial Sugar Rate 10%
 Justification for proposal:
Without an appropriate tariff level that would discourage
the cross-over of industrial imports into the direct
consumption market, imported industrial sugar would
make worse the excess importation experienced over the
last years, thereby compounding the problems of the
domestic producers and growers.
PROPOSED TARIFF RATE(S)
A customs duty based on a reference price system (RPS)

26. Industrial Sugar Rate 10%
EXPECTED OUTCOME/BENEFIT
Appropriate tariff for industrial sugar will encourage
production of refined sugar locally as Domestic producers
will be protected from subsidized refined sugar from the
world markets.
Successfully deal with the problem of cross-over of
industrial imports into the direct consumption market
that contributes to excess importation of sugar.
PROPOSAL FOR GOVT REVENUE DEFICIT RECOVERY
No Revenue Deficit. (Annexure 2).
AFFECTED TAX PAYER (S)
Sugar Producers/ Importers/ Industrial users.

27. Issue 10: Withholding Tax on Dividends
Rate: 5-10%
PROPOSED TARIFF RATE(S)
Zero percent withholding tax on dividends for 10 years for
new projects.
Make the industry conducive for future large scale
investments that:
will attract new investments and facilitate expansion of
sugar production that would lead to a sustainable sugar
industry.
Contribute to transforming Tanzania into a relatively low
cost agricultural products producer.

28. Withholding Tax on Dividends
Rate: 5-10%
Increase formal employment (estate and factory employees of new
projects)
 Increase informal employment (traders in sugar related
PROPOSAL FOR GOVT REVENUE DEFICIT RECOVERY
Deficit will be covered by tax from increased sugar production
through corporate tax and P.A.Y.E, as per the BRN target of
Additional 150,000 tons of sugar from new sugar projects by 2015/16,
which will be allocated to Local Government Authorities.
EXPECTED OUTCOME/BENEFIT
Expanded tax base to the Treasury, earning considerable revenue from
the expanded sugar industry, in terms of corporate tax and P.A.Y.E
 Create opportunity to rural population to earn incomes through out-
growing of sugarcane.

29. Issue 11: Tea
Tea Tax allowance on irrigation equipment
Irrigation equipment used in tea production is
charged import tax which increases production costs .
Proposal
Grant 100% tax relief on all irrigation equipment to
enable the smallholder tea growers to afford and
access irrigation equipment to allow productivity
increase.

30. Issue 12:Tea
Turnover Tax on loss making companies at a rate
of 0.3%
Turnover Tax on loss making companies at a rate of
0.3%
is applied on all entities that make losses continuously
for five years irrespective of whether there investment
incentives.
Proposal
Abolish this tax because tea has long gestation period
before making profits and profit margins are very low
in agriculture

31. Tea (Contd)
Workman’s Compensation Act 1%
Proposal
This levy should not be introduced as it will be
counter productive in rural employment and poverty
reduction
VAT
Proposal
Zero rate tea
Kenyan Tea Packers (especially the big ones) have
now been licensed to export packed teas into
Tanzania. Given that most are able to access cheaper

32. Tea (Contd)
teas from global market (Mombasa Auction) and can
export from Kenya at Zero duty, these teas land in
Tanzania at much cheaper costs than Tanzania teas.
In order to make Tanzania tea more competitive and
in the light of some years of experience with VAT
Zero rating (rather than VAT exemption) is what is
required.

33. Issue 13:Tea
Zero rate tea
Kenyan Tea Packers (especially the big ones) have
now been licensed to export packed teas into
Tanzania. Given that most are able to access cheaper
teas from global market (Mombasa Auction) and can
export from Kenya at Zero duty, these teas land in
Tanzania at much cheaper costs than Tanzania teas.
In order to make Tanzania tea more competitive and
in the light of some years of experience with VAT
Zero rating (rather than VAT exemption) is what is
required.

34. Conclusion
Pending the Government commitment to modernize
and transform Agriculture for the sake of improving
the growth of the national economy, the sector
should be rationally taxed.
The potential for Agriculture in Tanzania should not
be over-emphasized but practically exploited to boost
the economies of 70% Tanzanians who entirely rely
on the sector.
This is through formulating conducive fiscal
policies for agribusinesses.