State mulls PAYE tax on head of state salary

THE government will bring in Parliament proposals for a review of the Income Tax to enable deductions of Pay As You Earn (PAYE) tax on the salary of the president “when the right time comes.”

The Deputy Minister for Finance and Planning, Dr Ashatu Kijaji, said in Parliament here yesterday that the government would come up with a bill for a review of the Income Tax to include PAYE cuts in the salaries of the top most government officers.

“The government will come up with the proposals for review when the right time comes,” the deputy minister said in her reply to a supplementary question from Upendo Peneza (Special Seats, Chadema) who wanted to know when President John Magufuli will start paying PAYE.

She earlier said it was the intention of the government to reduce tax exemptions to reach one per cent of the national economic output, which will be implemented in phases according to the law of the country and economic and social environment.

She said efforts to reduce the exemption taxes began from 2010/2011 after realising the exemptions had reached about 3.2 per cent for the 2006/07 – 2009/10.

The government in 2009/2010 reviewed legal framework governing exemptions to remove exemptions that have no benefit to the economy. It was found that between 60 and 64 per cent of the exemptions were from Value Added Tax (VAT).

The deputy minister said various measures taken particularly adjusting the ceiling of exemptions granted by the Tanzania Investment Centre (TIC) and mineral sector had helped to bring down the exemptions to 1.9 per cent of the total economic output in the 2014/2015 financial year.

She said from July 2015 to March 2016 tax exemptions reached 564.1bn/- and with the trend, it is projected that exemptions for the 2015/2016 financial year would reach 752bn/-, which is equivalent to 0.8 per cent of the total economic output.

“A review of the VAT law is one area that contributed significant in our aim to reduce exemptions to one per cent of the economy,” she said. The deputy minister, however, told Members of Parliament (MPs) that some exemptions were inevitable on the country’s tax regime and were applicable worldwide.

“The most important thing is that the government would make sure the exemptions are granted according to the existing tax laws,” she said.