15/06/2008 (Nation Media.com) - The Tanzania government stands to lose Tsh762 million ($635,000) in revenue as it moves to amend import duties to harmonise them with those of the East African Community Customs Union.

Finance Minister Mustafa Mkulo said in his budget speech that the East African Community Customs Management Act has proposed that import duty for several goods be amended or scrapped completely.

The agreed proposals will be submitted to the Sectoral Committee on Trade, Finance and Investment for endorsement.

The import duties to be scrapped include those on hand hoes and other agricultural implements, inputs imported by Tanzania power firm Tanelec for the manufacture of transformers and switch gears; up to 20,000 metric tonnes of barley that will be imported by brewery companies in Tanzania and  data processing machines.

Other products that will benefit from import duty reduction are sodium sulphate — from 25 per cent to 10 per cent — vehicles specifically designed for garbage collection procured by local authorities or their approved agents.

Amendments will also see removal of the 10 per cent import duty rate on crude palm oil. However, semi-processed palm oil will continue to attract import duty of 10 per cent.

The amendments to the common external tariff rates were discussed by partner states Kenya, Uganda, Rwanda and Burundi during the pre-budget consultation meeting of the EAC Ministers for Finance, which was held in Nairobi on June 2.

In the 2006/07 budget, Tanzania decided to stay the application of the CET for one year on imports of crude palm oil, and instead impose a duty rate of 10 per cent for imports of the same.

The government’s announcement of the new tariff last year was immediately followed by intense lobbying by opposing groups.

Edible oil manufacturers lobbied for a revised approach of the duty rate, while those in seed and oil industries called for even higher duty.

The decision to stay the application of CET became the government’s litmus test over its integrity to stand by its decisions against powerful stakeholders.

The debate not only created a bitter division between edible oil manufacturers — who are largely the importers of crude palm oil — and local seed and oil industries, who are buyers of local grown seeds, but also threatened to divide some senior government decision makers.

According to experts, the government’s decision had serious consequences for the industry, as it would have made intermediate imports of palm oil from Kenya and Uganda cheaper, since the imports would not have attracted the 10 per cent duty for the crude oil.

At risk was a combined refinery investment of $125 million and more than 2,000 jobs.

This would, to a large extent have encouraged large-scale smuggling of the product into the country, which is already happening in Arusha and Moshi.

Industry players warned that the government would have lost revenue amounting to Tsh2 billion a month ($1.5 million) if the refining were to collapse.

Former finance minister Zakia Meghji had said at the time that the 10 per cent duty rate decision was taken “in order to protect local farmers producing alternative oil seeds and curb tax evasion.”