Several experts and labour sector stakeholders have said the 2% tax reduction on Pay As You Earn (PAYE) is a good beginning though its effect on disposable income is insignificant. The experts on the field said the move, apart from being a good start, would also increase tax-paying compliance and reduce cost of doing business. President John Magufuli promised the PAYE reduction across the board during this year’s May Day (Workers Day) held at national level in Dodoma.
The Association of Tanzania Employers (ATE), Executive Director, Dr Aggrey Mlimuka, said they welcomed any tax reduction on salaries since it would lessen the cost of doing business. “Generally, it’s a good beginning. Job seekers normally negotiate for net pay and we add up taxes and other charges on top of that. So minus 2.0% is good for us,” Dr Mlimuka observed.
Trade Unions Confederation of Tanzania (TUCTA) Secretary General (SG) Nicholas Mgaya told the ‘Daily News’ that Dr Magufuli’s government drives to deal with inefficiency and corruption at the end of day stands to facilitate an increase in salaries. “At least we (TUCTA) see light at the end of the tunnel on workers’ benefits and salaries hike; we might get a salary increase this year or next year,” Mr Mgaya said. The TUCTA SG said irrespective of the amount being small, it was something as “this is just the beginning and practically, it is a good gesture.”
Another economist, Professor Honest Ngowi from Mzumbe University’s Dar es Salaam Campus, said the 2% tax-cut on salaries at the end of day poised to be chopped off by inflation, exchange rate and consumable tax increase in the 2016/17 budget. “The PAYE cut is like you are giving by one hand and taking by another hand given the fact that the next 29.3 trillion budget is full of tax hikes,” Prof Ngowi noted.