Tanzania to Introduce New Incentives to Attract Infrastructure Investors

Posted on : Wednesday , 15th July 2015

The Tanzanian government plans to launch new investment incentives in order to attract more infrastructure investors in the country, said Juliet Kairuki, Executive Director, Tanzania Investment Centre.

This is part of a larger government plan where it is going to introduce a set of new investment incentives in a number of key sectors.

“Preparations are ongoing and [we] will inform you when we are through,” she stated.

According to Kairuki, opportunities for investment include hotel construction and other tourist accommodation, residential houses, commercial buildings, warehouses and industrial sheds, estates and factory buildings, schools, hospitals, water supply and other social infrastructure.

In order to meet demand and compete against road transportation, government is seeking for investors in construction, expansion and maintenance of the railway network and road related infrastructure through various schemes including build operate and transfer (BOT), build own operate transfer (BOOT) among others, she explained.

One of the steps taken by the government to enhance investment in Tanzania is the incorporation of provisions regarding investment incentives and the government has signed double taxation treaties with many countries. It is negotiating with more countries to improve investment environment, she added.

The government is also looking at alternatives to incentives, such as redirecting the freed fiscal resources towards infrastructure and human resource development, said Kairuki adding that the government will also put in place proper incentive guidelines for proper control.

Investors who meet the minimum investment threshold of $100,000 for local Companies and $300,000 for foreign companies are eligible for a Certificate of Incentives issued by the Tanzania Investment Centre.

Some construction incentives offered by the government are reduced import tariff on project capital items for investments in priority sectors such as commercial buildings and zero tariffs for capital items in lead sectors such as road construction, bridges, airports, and generation of electricity.

Infrastructure investors are also exempted from customs duties, VAT, and other taxes levied on imported capital goods, such as plants, machinery & equipment, and construction materials.

The government also offers automatic permits for employing an initial quota of five foreign nationals on the construction projects, she added

Currently tax and non-tax incentives are granted to both local and foreign infrastructure investors as a measure to attract them to the country, and tax incentives are mainly in the form of enhanced capital deductions and allowances and are structured according to the lead and priority sectors

However, according to Alvin Mosioma, Executive Director, Tax Justice Network-Africa (TJN-A), a small group of foreign investors are the main beneficiaries of these tax incentives and exemptions while the general population and the country as a whole are losers due to substantial revenue losses.

The most important factors in investment attraction are good quality infrastructure, low administrative costs of setting up and running businesses, political stability and predictable macroeconomic policies, he added.

Increased tax incentives will result in a loss of current and future tax revenue and could require large administrative resources among others.

“In our view, the government should first analyze some of these incentives granted to attract investment and the government should set up a body to be accountable to the public in all matters related to granting of incentives and exemptions,” he stated

The TJN-A is a pan-African initiative established in 2007 and a member of the global Tax Justice Network. TJN-A seeks to promote socially just, democratic and progressive taxation systems in Africa and other tax related issues in Africa.