VAT impacting Tanzania’s competitiveness
The introduction of a value added tax on international transport and ancillary services is affecting Tanzania’s economy.
The Tanzania Ports Authority (TPA) is a major contributor to Tanzania’s national revenue and the Government is keen to expand its operations by doubling capacity by 2020. However, since July 2015, when VAT was introduced on international transport and ancillary services, the TPA has suffered a significant loss of major clients as the additional costs have made it difficult to compete with other regional ports.
The Port of Dar es Salaam in Tanzania currently handles 27% of the East African transit goods market and this is expected to shrink. Trade has already started shifting to other East African ports, such as Mombasa in Kenya, which controls 73% of the volume.
The Tanzania Revenue Authority says that the Port of Dar es Salaam is a more cost-effective trade route than Mombasa, but its claim appears to overlook certain factors and costs associated with transit cargo, which show that the price of routing a container from Mombasa to, say, Rwanda or Uganda is considerably lower than from Dar es Salaam.
For more information, contact:
Nexia SJ Tanzania
T: +255 713 444 254