20/6/06 ( Allafrica,com)  - Tanzania will delay the implementation of the Common External Tariff (CET) rate of zero per cent on crude palm oil, for one year, and instead impose a duty rate of 10 per cent.

Announced by Finance Minister Zakia Meghji last Thursday in her 2006/07 budget proposals, this was one of several measures agreed upon by Kenya, Uganda and Tanzania at a meeting of finance ministers held earlier this month.

Mrs Meghji, who was presenting her first budget, enjoys the distinction of being the first woman finance minister in the region.

Tanzania, Kenya and Uganda have agreed to review the Common External Tariffs, which should eventually result in protecting regional industries. The decision is also expected to help consolidate the growth of manufacturing industries in the region.

This will protect local farmers producing alternative oil seeds and curb tax evasion. The rate on RBD palm stearin - the raw material whose duty rate has been criticised by standalone soap manufacturers in Tanzania - will be reduced to 10 per cent from the current 25 per cent.

"The measure is aimed at protecting small producers from unfair competition within the industry," said the minister. Similarly, duty for raw materials used to manufacture printing and packaging papers has been slashed from 25 per cent to 10 per cent, in a move to cut production costs.

There was further adjust-ment on regional paper products for raw materials used in manufacturing of paper, which has been reduced from 10 per cent to zero per cent.

Duty on matchboxes has been raised from the current 35 per cent to 50 per cent to protect local manufacturers from unfair competition.

Import duty has been eliminated for gas cylinders, solar-powered equipment, other specialised equipment and energy saving bulbs to encourage the use of alternative sources of energy - given the current crisis in the region - and help protect the environment.

However, for the first time, sugar imports from countries in the Southern African Development Community (SADC) into East Africa will be subjected to the EAC's Common External Tariff, to be imposed soon.

Mrs Meghji said that, in SADC, sugar is not included in the Programme of Elimination of Internal Tariffs and a special arrangement has been made for the allocation of quotas to member states who want to export to South Africa, but owing to its low production capacity, Tanzania, which does not even meet its domestic demand, has not been allocated export quotas.

It is believed that the importation of sugar at a duty of 25 per cent may end up undermining current efforts to increase production and satisfy local demand.

Trade incentives, however, did not get much prominence in the first budget under President Jakaya Kikwete's watch. Instead, several measures were introduced to curb tax evasion and to widen the tax base, including eliminating exemptions enjoyed by investors.

Tax exemption on fuel to mining companies has been cited by donors as being one area in which the government incurs big losses due to fraud.

The tax exemption cur-rently providing for non-utility vehicles for any investor with a certificate from the Tanzania Investment Centre (TIC) has been abolished, but exemption for utility vehicles will remain.

Salt producers using renewable resources will also be exempted from paying royalty to support government efforts in fighting iodine deficiency diseases such as goitre.

However, the government has provided incentives to locally grown, ground, roasted or instant coffee as well as tea, with an eye on revamping production and processing and reviving the coffee export sector.

Incentives have also been provided to companies by reducing corporate income tax from the current 30 per cent to 25 per cent for a period of three years, from the date of listing of newly-listed companies at the Dar es Salaam Stock Exchange.

To improve revenue from the Road Fund, which is used for road maintenance, the government has increased fuel levy from the current Tsh90 (85 US cents) per litre to Tsh100 (95 US cents). It has introduced a provision in the law for the automatic annual adjustment of the specific rate for inflation.