THE UNIVERSITY OF DODOMA

COLLEGE OF BUSINESS STUDIES AND ECONOMICS

DEPARTMENT OF BUSINESS ADMINISTRATION AND MANAGEMENT

COURSE NAME; PUBLIC FINANCE AND TAXATION 2.

COURSE CODE: AF 332

COURSE INSTRUCTOR: MR. DAVID MWAKAPALA

NATURE OF WORK: INDIVIUAL ASSIGNMENT

DATE OF SUBMISSION: 23rd June 2023

DEGREE PROGRAM: BBA

S/N NAME REG. NUMBER SEX

1 YONA N SONGELAHE T/UDOM/2020/02103 M

1. Nickson Zablon, a public servant, imported a used Prado from Dubai. The car, manufactured in
1993, had cost her USD 8,000.00. Mrs. Peace paid, in addition to cost, Insurance and Freight
charges of USD 200.00 and 1,200.00 respectively. On arrival to Dar port on March 30, 2007, the
customs officers contended that the vehicle is subject to uplifting, as its transaction value is not
acceptable by Customs Department. After discussion and submission of the treasury voucher in
respect of import duty, Mrs. Peace was still required to pay shillings 10,512,000.00 based on
exchange rate of shillings 1,250.00 per dollar. The applicable tax rates are Import Duty 20%,
Excise Duty 10% and VAT 20%. The assessed taxes as noted by Mrs. Peace include the Excise
Duty as (Management and Tariff) Cap 147.

a) What is transactional value of imported goods;

b) List and briefly the Agreed Customs Valuation (ACV) in their hierarchical order;

c) Advise Nickson Zablon, on whether the procedures and computations by Customs department
are in line with the EACCMA, 2004.

SOLUTION QUESTION 1

a) The transactional value of the imported goods is the total amount paid for the car, including its
cost, insurance charges, and freight charges. In this case, it would be:

Cost insurance and freight (C I F) = Cost of the car + Insurance charges + Freight charges

CIF = USD 8,000.00 + USD 200.00 + USD 1,200.00

CIF = USD 9,400.00

Convert the USD into Tshs.

But, 1USD = 1250 shillings

9400 USD= x

Therefore, x= 1250 shillings * USD 9400

= 11,750,000 shillings

Total CIF = 11,750,000 + 10,512,000 = 22,262,000 shillings

COMPUTATION OF TRANSACTION VALUE:
Items Amount (Shillings)
CIF 22,262,000
Add; import duty (20%) 4,452,400
Total CIF and import duty 26,714,400
Add; exercise duty (10%) 2,671,440
Custom value 29,385,840
Add; VAT (20%) 5,877,168
Transaction Value 35,263,008
The transaction value of the imported good is 35,263,008 shillings

B). The Agreed Customs Valuation (ACV) is determined in a hierarchical order based on the
following methods outlined in the EACCMA (East African Community Customs Management
Act) 2004:

1. Deductive Value Method: If none of the above methods can be applied, the customs value
may be determined using a deductive value method. This involves subtracting certain costs
incurred after importation from the sale price of the goods in the country of importation.

2. Computed Value Method: If the deductive value method cannot be used, the customs
value may be determined based on the computed value, which includes the cost of
production, general expenses, and profit.

3. Transaction Value Method: This is the primary method of valuation and determines the
customs value based on the price actually paid or payable for the imported goods. It takes
into consideration any adjustments required as per the Act.

4. Fall-Back Method: If none of the above methods can be applied, the customs value may
be determined using reasonable means consistent with the principles and general provisions
of the EACCMA
C). After the computation, the procedures and computations by the Customs department were not
lined as before the computation as explain with the EACCMA 2004. so, assess the compliance,
there should be a clear review of the customs procedures, regulations, and calculations carried out
by the department would be necessary. It is advisable for Nickson Zablon to consult a customs
expert or seek legal advice to evaluate the procedures and computations in detail

2. Mr. Mwampulo imported goods worth Sterling Pounds 340,000.00 from England and paid
expenses in respect of insurance and freight of STG 17,000.00 and 45,000.00 respectively. On
arrival, the Customs Department assessed total taxes payable as shillings. At the time of
assessment, the prevailing exchange rate was shillings 2,150.00 to Sterling Pound.

The Custom Officer in charge informed Mwampulo that the value of his cargo was uplifted as per
the requirements of the east African Community Customs Management Act, 2004. The officer
further informed the importer that the applicable tax rates are Import Duty 10%, Excise Duty 7%
and VAT 18%.

After prolonged and heated discussions, disagreed with the Proper Officer and even condemned
the officer of not being conversant with law and even trying to deploy unlawful jargons for
personal gains.

Mwampulo approached you for consultancy, as he believes that you have been attending a
taxation course organized by the Millennium Professional Accountants Trainers and Consultants
at Mtendeni Primary Scholl for over three months now. Importation docket Mr. Handles to show,
inter alia, Mr. Mwampulo is supposed to pay shillings 372,397,200.00.

Required: Advice Mwampulo whether the proposals by the Customs Officer are legal and
compute the value adopted by the proper officer
 SOLUTION QUESTION 2

i. Calculation of CIF value:

CIF (Cost, Insurance, and Freight) value is the total value of imported goods, including the cost of
goods, insurance, and freight charges. In this case:

CIF Value = Value of Goods + Insurance + Freight

CIF Value = £340,000 + £17,000 + £45,000

CIF Value = £402,000

ii. Conversion of CIF value to shillings:

To convert the CIF value from Sterling Pounds to Shillings, we use the prevailing exchange rate
of 2,150.00 Shillings to 1 Sterling Pound:

CIF Value in Shillings = CIF Value * Exchange Rate CIF Value in Shillings

= £402,000 * 2,150.00

CIF Value in Shillings = 864,300,000 shillings

iii. Uplifted value as per the east African community customs management act, 2004:

The Customs Officer informed Mwampulo that the value of his cargo was uplifted according to
the requirements of the East African Community Customs Management Act, 2004. So, to compute
the uplifted value, we would calculate as follow;

iv. Calculation of taxes:

Import Duty:

Import Duty is charged as a percentage of the CIF value.

The applicable rate is 10%

Import Duty = CIF Value in Shillings * Import Duty Rate Import Duty = 864,300,000 * 0.10

Import Duty = 86,430,000 shillings

Excise Duty:

Excise Duty is also charged as a percentage of the CIF value and import duty.

The applicable rate is 7%.

Total of CIF value and import duty= 864,300,000 + 86,430,000

= 950,730,000 shillings

Excise Duty = CIF Value and import duty in Shillings * Excise Duty Rate

Excise Duty = 950,730,000 * 0.07

Excise Duty = 66,551,100 shillings

VAT (value Added Tax)

VAT (Value Added Tax) is charged as a percentage of the CIF value plus Import Duty.

VAT = (CIF Value in Shillings + Import Duty+ Exercise Duty) * VAT Rate

VAT = (864,300,000 + 86,430,000+ 66,551,100) * 0.18

VAT = 183,110,598 shillings

v. Total taxes payable:

Total Taxes Payable = Import Duty + Excise Duty + VAT

Total Taxes Payable = 86,430,000 + 66,551,100 + 183,110,598

Total Taxes Payable = 336,091,698 shillings

Therefore; Based on the calculations, the total taxes payable amount to 336,091,698 Shillings.
However, without the specific information about the uplifted value as per the East African
Community Customs Management Act, 2004, it is not possible to determine whether the proposals
by the Customs Officer are legal or compute the value adopted by the proper officer accurately.

3. Taxation reform and amendment

These is the process of assessing the taxation act and system of colleting tax revenue in mining
Sectors and making changes for any loopholes of the system in order to increase revenue
Collection together with the expansion of mining sector in the country. Since 2001 however the
regulatory environment for mining has seen consistent change with ongoing tightening of the fiscal
regime, with some of the most significant changes being made in the past 3 years, where by
different straight was made to increase revenue collection in mining sectors such as; Value Added
Tax.
Tanzania’s value added tax (VAT) is charged on domestic and imported goods and services (The
United Republic of Tanzania, 2006c). The Value Added Tax Law exempts mineral sector
Companies from paying VAT on some imported inputs and capital goods such as technology and
machines for mining sector so that they can collect the tax on processing and marketing the
minerals everyone will pay the tax but these lead to high tax rate problem because the extraction
company pay 18% of the amount of the minerals to the government as VAT but also the costume
(wholesale) also will pay 18% as VAT to the government as tax so the price of the minerals become
very high to the costume as results of tax avoidance.
Required:
a. What are the macroeconomic issues impacts of minerals in Tanzania?
b. Describe different effort and reform to improve tax revenue collection from mining sector in
Tanzania
Explain the challenges faces tax policies and related issues in regard to mining sector in Tanzania
 ANSWERS QUESTION 3
i. Macroeconomic issues impact of minerals in Tanzania

The mining sector in Tanzania is a significant contributor to the country's economy, and as such,
it has both positive and negative macroeconomic impacts. Here are some of the macroeconomic
issues impacted by minerals in Tanzania:

• Infrastructure Development: The mining sector has contributed to the development

of infrastructure in the country, particularly in areas where mining activities take place.
Mining companies have invested in infrastructure such as roads, bridges, and airports,
which has improved access to these areas and facilitated economic activities. The
development of infrastructure has also helped to encouraged investment in other sectors
of the economy such as in industries.

• Environmental Impacts: The mining sector has significant environmental impacts,

particularly on land degradation, water pollution, and deforestation. These impacts can
have long-term negative effects on the economy, particularly on agriculture, which is
the backbone of Tanzania's economy.

• Export Earnings: Tanzania is rich in mineral resources, including gold, diamonds,

and other precious and base metals. The mining sector is a significant contributor to
the country's export earnings, accounting for about 50% of the country's total exports.
The revenue generated from mineral exports is used to finance various development
projects in the country, including infrastructure development, health, education, and
poverty reduction programs. The expansion of the mining sector has led to an increase
in foreign exchange earnings, which has helped to stabilize the country's balance of
payments.

. Government Revenue: The mining sector is also a significant source of government

revenue in Tanzania, accounting for about 5% of total government revenue. The
government collects revenue from mining companies through various taxes and royalties,
including corporate income tax, withholding tax, and mineral royalty. The revenue
collected from the mining sector is used to finance various development projects in the
 country, including infrastructure development, health, education, and poverty reduction
programs. The expansion of the mining sector has led to an increase in government
revenue, which has helped to finance the country's development agenda

• Employment: The mining sector provides employment opportunities for thousands of

Tanzanians. The sector's contribution to employment has been increasing in recent
years due to the expansion of the sector. Such as in direct employment in the sector
includes skilled and unskilled labor, while indirect employment includes jobs in
support industries such as transport, logistics, and catering.

ii. Different effort and reform to improve tax revenue collection from mining sector in
Tanzania.

There have been various efforts and reforms to improve tax revenue collection from the mining
sector in Tanzania. Some of these include:

Reviewing tax incentives:

The Tanzanian government has reviewed tax incentives given to mining companies in order to
ensure that they are not overly generous and do not lead to revenue loss. . As part of this review,
the government introduced new guidelines for granting tax incentives. These guidelines require
mining companies to meet certain criteria before they can receive tax incentives. For example,
companies must demonstrate that they have made a significant investment in the country and that
they are contributing to the development of local communities.

Increasing royalty rates:

The Tanzanian government has increased royalty rates on minerals such as gold, copper, and silver.
This increase in royalty rates has led to an increase in revenue collection from the mining sector.
The government has also introduced a new system for calculating royalties, which is based on the
value of minerals produced rather than the volume produced.

This change is aimed at ensuring that mining companies pay their fair share of royalties, regardless
of the volume of minerals produced. The new system also includes provisions for adjusting royalty
rates based on changes in market prices, which ensures that the government benefits from increases
in mineral prices.

Strengthening tax administration:

The Tanzanian government has taken steps to strengthen tax administration in the mining sector.
This includes improving tax audits, increasing transparency in tax collection, and improving the
capacity of tax authorities. The government has also introduced a new system for tracking mineral
exports, which ensures that all minerals leaving the country are properly accounted for and taxed.

These measures are aimed at reducing tax evasion and ensuring that mining companies pay their
fair share of taxes. They are also designed to improve the efficiency of tax collection and reduce
the burden on taxpayers.

Improving monitoring and reporting:

The Tanzanian government has improved monitoring and reporting of mining activities to ensure
that mining companies are paying their fair share of taxes. This includes requiring companies to
submit regular reports on their activities and implementing measures to detect tax evasion. The
government has also established a new system for tracking mineral exports, which ensures that all
minerals leaving the country are properly accounted for and taxed.

Reforming the VAT system:

The Tanzanian government has reformed the VAT system to address the problem of high tax rates
in the mining sector. This includes introducing a reverse charge mechanism for VAT on mineral
exports, which shifts the responsibility for paying VAT from the exporter to the importer. This
change is aimed at reducing the tax burden on mining companies and improving the
competitiveness of the sector.
 iii.The challenges faces tax policies and related issues in regard to mining sector in
Tanzania.

Lack of transparency in tax policies and regulations:

One of the major challenges facing tax policies and related issues in the mining sector in Tanzania
is the lack of transparency in tax policies and regulations. The mining sector is known for its
complexity, and the tax policies and regulations governing it are often complex and difficult to
understand. This makes it difficult for investors to comply with tax laws, leading to noncompliance
and the loss of revenue for the government. To address this issue, the government of Tanzania
needs to ensure that tax policies and regulations are transparent and easy to understand.

Weak institutional capacity:

Another challenge facing tax policies and related issues in the mining sector in Tanzania is weak
institutional capacity. The government of Tanzania needs to strengthen its institutions responsible
for tax administration and enforcement, including the Tanzania Revenue Authority (TRA) and the
Ministry of Finance and Planning. This will help to improve the effectiveness of tax policies and
regulations, leading to increased revenue for the government.

Inadequate monitoring and evaluation:

Inadequate monitoring and evaluation of tax policies and related issues in the mining sector in
Tanzania is another challenge. The government of Tanzania needs to establish effective monitoring
and evaluation mechanisms to ensure that tax policies and regulations are being implemented
effectively and efficiently. This will help to identify gaps and weaknesses in tax policies and
regulations and enable the government to take corrective action.

Inadequate infrastructure and services:

Inadequate infrastructure and services, such as roads, electricity, and water, are also a challenge
facing tax policies and related issues in the mining sector in Tanzania. The lack of adequate
infrastructure and services makes it difficult for mining companies to operate efficiently, leading
to reduced revenue for the government. To address this issue, the government of Tanzania needs
to invest in infrastructure and services to support the mining sector.
Corruption:

Corruption is another major challenge facing tax policies and related issues in the mining sector in
Tanzania. Corruption undermines tax policies and regulations, leading to reduced revenue for the
government. To address this issue, the government of Tanzania needs to strengthen its
anticorruption measures and ensure that corrupt officials are prosecuted.
 REFERENCES

East Africa Community Custom Management, East Africa Community Custom Management Act
(EACCMA), (1997).

Tanzania Revenue Authority. (n.d.). Customs Valuation. Retrieved from

https://www.tra.go.tz/index.php/customs-valuation

Mining Sector Revenue Collection Challenges and the Way Forward." African Development Bank Group,
2019. Retrieved from https.www.afdb.org/en/documents/document/tanzania-miningsector-revenue-
collection-challenges-and-way-forward-102934.

Tanzania's Mining Reforms; A New Dawn in Tanzania's Mining Sector?" ENSafrica, 2020, retrieved from
https.www.ensafrica.com/news/detail/2418/tanzanias-mining-reforms-anew-dawn-in-tanzanias-
mining-sector/.