THE protracted wrangle over the use of electronic fiscal devices and delayed implementation of some tax measures have widened a budget deficit in the first half of the 2013/14 financial year.
The Central Bank says in its latest monthly report that resistance by some traders to use electronic fiscal devices and the delay to effect tax SIM card and on money transfer services had led to a revenue shortfall which increased government budget deficit.
The bank says in the report that that budget deficit has widened to 800.6bn/- in the first half of the 2013/14 year. The government had to finance it by borrowing from domestic and foreign sources.
The report says government revenue was 4,423.7 billion or 79.3 per cent of the target for the period with tax revenue accounting for 91.5 per cent of total revenue.
Grants received amounted to 976.0 bn/- compared with 1,352.2 bn/- projected for the period. Total expenditure amounted to 6,033.4 bn/-, of which 73.2 per cent was recurrent expenditure and the balance was development expenditure.
According to the report domestic revenue and grants amounted to 1,092.7 bn/- in December last year. Revenue collected by the central government was 939.4 bn/-, which was 79.4 per cent of the target. Tax revenue amounted to 895.8 bn/-, or 82.5 per cent of the target.
The Bank of Tanzania Director of Economic Policy and Research, Dr Joe Masawe said there was no cause for alarm as the government had adopted measures to cushion the effect of the shortfall.
He said the deficit was caused by delays in implementing some tax measures on SIM card and money transfer services and continuing resistance of using electronic fiscal devices by some traders.
The government had imposed a monthly tax of 1,000/- on all SIM card users all over the country in June last year to boost its revenue. However it was scrapped and replaced by a new excise duty increased to 17 per cent from 14.5 per cent.
“The revenue shortfall is due to some tax measures that could not be implemented as projected on sim card and money transfer,” he told the ‘Daily News’ in an interview.
He said the government had adopted some fiscal measures to mitigate the effect of the shortfall which included scaling down of expenditures.
A visiting IMF delegation that assessed the country’s fiscal performance said it was satisfied that the government was taking measures to enhance fiscal sustainability. It noted that budget deficit had widened but said there were measures adopted to mitigate the problem.
“The revenue shortfalls and subsequent expenditure compression experienced during the current fiscal year reinforce the importance of making realistic revenue assumptions during the upcoming budget cycle.”
“Economic growth remains strong. With continued prudent monetary policy and benign developments in food prices in the region, inflation is expected to further moderate by mid-2014 to the medium term target of 5 per cent,” the IMF Assistant Director and Division Chief, African Department, Paolo Mauro said in statement.
Mauro said the current account deficit widened further in 2013, as the global prices of gold and traditional exports weakened.
“Fiscal pressures last year resulted in the ceiling on net domestic financing agreed under the government’s IMF-supported programme being breached by 1.2 per cent of GDP.
During the current fiscal year (2013/14), revenues are falling short of the assumptions embedded in the budget approved by Parliament,” he said in the statement.
According to him the government was appropriately cautious in releasing funds for budget implementation to attain a fiscal deficit close to the 5 per cent of GDP target in the budget.