TANZANIA’S FOREIGN TRADE: POLICY AND PERFORMANCE

Tanzania’s Foreign Trade is administered by the Ministry of Industry Trade and Marketing.  The Ministry co-ordinates inputs for formulating policy and instruments to guide implementation.

Tanzania’s general trade policy is influenced mainly by three level factors:  the concern for the Balance of Payments position, Domestic need satisfaction and fulfilment of international obligations.

Trade Policy Instruments

In attaining to the above mentioned objectives, price related instruments are mainly employed and to a lesser extent direct controls.  Direct controls are exercised to preserve environment and ecological balances – through exploitation of natural resource based products.

Export Performance and Characteristics

Tanzania has an export potential for a wide range of products from agricultural to semi processed and manufactured products.  Agricultural commodity exports dominate by contributing to over 58% of all export earnings, followed by economic services which contribute about 42%.

Commodity exports include traditional products (coffee, cotton, sisal, tea, tobacco, cashew, cloves and fishery products).  Non-Traditional include flowers, fruit and vegetables as well as some processed and manufactured products.

The earnings from commodity exports, increased by 36.4% from US $2.2bn (in 2007) to US $3.0bn (in 2008).  Earnings from services exports also increased by 15.6% from US $1.8bn (in 2007) to US $2.1bn (in 2008); coming mainly from tourism and transit trade.

 
The Direction of Exports

Tanzania’s exports are distributed to different global markets.  The current distribution indicates that Europe which in the past was consuming more than 50% of Tanzanian exports has lost its share during the last five years from 49% to 35.6%. The share of Tanzanian exports has increased to African countries from 20% to 30.6%, to Asia from 14.6 to 21% and to the Americas from 1.6% to 2.3% while exports to the rest of the world declined from 14.8% to 9.7%

The Import Policy

Tanzania’s import policies aim at improving domestic production in order to ensure availability of raw materials, capital goods and consumables necessary to produce for both exports and home consumption.

Taxes on International Trade

The Customs and Excise Dept. administers all taxes on International trade, which are – Import Duty, Excise Duty on Imports and VAT.

Import Duties

Under the EAC, partners have adopted a CET effective from January 2005, As a result rates which are applicable now are:
• 0% for raw materials, capital goods, tractors, pure breed animals, fertilizers and medicines.
• 10% for semi finished goods
• 25% for final consumer goods

Excise duty on Imports
This is levied on certain specified imports such as wines, spirits, cigarettes, petroleum products, saloon cars and specified non-utility vehicles which are aged 10 years or more.

Value Added Tax (VAT) on imports

VAT is levied on all goods and services imported into the country unless are specifically exempted under the (VAT) Law. Since July 2008, Applied Rate is 18%.

Tax Incentives on International Trade

Import Duty

The Government has provided some incentives through import duty exemption for certain products as a way of encouraging introduction and adoption of new technologies.  Such products include computers and software, agricultural equipment, hotel equipment, solar equipment and accessories.

Duty Drawback Scheme and Export Processing Zones
As already explained above, these schemes are to encourage exports.

Manufacturing under Bond

All factories registered to manufacture goods under bond for export are exempted from import duty and other taxes.

VAT Exemption

Exempted goods are agro inputs, health supplies, veterinary supplies, agro implements, aircrafts and related supplies, computers, photovoltaic and solar, thermal and petroleum products.

Zero Rated – All exports are exempted under the VAT Law.