Angola should introduce a value-added tax (VAT) to complement the recently adopted non-oil tax reform, the International Monetary Fund (IMF) has said.

The long-awaited non-oil tax reform was approved by the National Assembly on July 4, 2014. The IMF welcomed the package as a “crucial step toward reducing the budget’s heavy reliance on oil revenue.”

After running a surplus over the last four years, the authorities expect an overall fiscal deficit of about four percent of GDP in 2014, reflecting a ten percent decline in oil revenue during the first quarter of 2014. “While this is unlikely to be a permanent phenomenon, significant steps have been taken in non-oil tax reform under the recently approved fiscal legislation aimed at diversifying the sources of non-oil revenues,” the IMF said.

The reform included the adoption of three laws: the general tax code, the tax procedure code, and the tax collection code. In addition, changes to personal and corporate income taxes were introduced to boost consumption and investment.

The corporate income tax rate was reduced from 35 to 30 percent, while the personal income tax threshold was increased to a monthly income of 34,450 kwanza (USD353), from 25,000. At the same time, the tax base was expanded by closing loopholes. A partial tax amnesty for some tax debts prior to December 2012 was also approved.

“Staff welcomes the recent approval of the core decrees comprising the non-oil tax reform. The approval of this legislation should be followed by improvements in the tax and customs administrations to fully realize the potential for higher non-oil revenue collections. A value added tax (VAT) could also be introduced in due course and, if implemented diligently, would provide more stable revenue for the budget, thus reducing the dependency on oil revenue and shielding the budget better from oil revenue volatility,” the IMF concluded.

Dar es Salaam — Many people believe that the growing influence of China on the Tanzanian economy and global politics is a new phenomenon. Last week, the Chinese Cultural Centre in Dar es Salaam provided a case study to prove otherwise.

In fact, at one time, around 618 AD, China was indeed a global economic power, specialising in silk trade.

Thousands of years ago, the people of East Africa, for example, used to trade with China, mainly in silk and porcelain, according to a recent report released by the Chinese embassy in the city.

The only difference is the manner in which trade between Tanzania and other African countries is conducted under the present economic conditions.

China, for many years, was not a member of the International Monetary Fund (IMF) and the World Bank. It only opened up its economy to the world in recent years.

Last November marked a turning point with the Bretton Woods Institutions (World Bank, and the International Monetary Fund), approving the Chinese currency, yuan, as one of the reserve currencies influencing the global financial market.

At the time of announcing the decision, Christine Lagarde, IMF managing director, was quoted as saying that the decision is “an important milestone in the integration of the Chinese economy into the global financial system”.

A senior officer at the Dar es Salaam-based Chinese Cultural Centre, Mr Gao Wei, said recently Beijing’s economic power could be traced back to the Tang dynasty, between 618 and 907 AD.

“During that period, Chinese porcelain was always at the centre of world cultural communication, and was the most loved, admired and widely imitated product in the world,” reads part of report which the Centre circulated to the media recently. Trade in Chinese silk and porcelain between the people of East Africa lasted for thousands of years before the slave trade era and coming of colonialists, according to experts.

This implies that the acceptance of the yuan by the IMF to join other five currencies as global reserve currencies is the re-emergence of the old glory of Chinese power in global trade, according to Mr Wei.

Speaking to the media on the sidelines of a recent forum organised by the Financial Management Institute for Eastern and Southern Africa (MEFMI), Bank of Tanzania (BoT) governor, Prof Benno Ndulu said Tanzania’s participation in the international bonds market should focus more on the Chinese currency, a.k.a renminbi, because of the current state of the global economy.

Tanzania now keeps five per cent of foreign exchange reserves to harness trade opportunities from the giant Chinese economy.

The BoT governor says: “Following the decision by the IMF to approve the yuan as one of the reserve currencies, we have done the right decision to keep five per cent of our foreign currencies’ reserve in yuan. Yuan has become the most important foreign currencies in international stock market trading. Our experience has shown that we have benefitted much from trading in Yuan in the international bonds market.”

With that decision, the yuan joined the US dollar, Euro, Japanese yen, Swiss Franc and British pound in the list of currencies the IMF uses as an international reserve asset, according to the BoT governor.

MEFMI executive director Caleb Fundanga says countries of Eastern and Southern Africa must focus more on trading with China to gain more from international trade. China, he notes, is now the world’s largest economy on a purchasing-power-parity basis. The Asian giant roiled a significant part of the African economy by cutting back on resource imports.

 

ZAMBIA has signed a bilateral trade agreement with Angola to increase trade between the two countries. The trade stands at US$8 million in exports and US$175,000 in imports

The bilateral trade agreement will further exempt some products from customs duty.

Minister of Commerce, Trade and Industry Margaret Mwanakatwe, who signed for the Zambian government, said that the bilateral trade agreement will have a positive impact on the diversification programmes being pursued by the two countries.This is according to a statement issued in Lusaka yesterday by Ministry of Commerce Trade and Industry permanent secretary Kayula Siame

Mrs Mwanakatwe said the agreement is designed to facilitate the expansion of trade between the two countries and further strengthen economic and political ties.

The minister said in Luanda during the signing ceremony last week that: “Synergies between trade promotion and investment promotion will be critical to harnessing the benefits associated with the implementation of the bilateral trade agreement.”

She urged Zambian exporters to take advantage of the trade agreement and the Angolan market by ensuring that their goods meet international standards and to work with the Zambia Bureau of Standards.

“The Zambia Development Agency will be on hand to provide any facilitation the exporters will require to access the Angolan market,” Mrs Mwanakatwe said.

Angola’s Minister of Commerce, Rosa Escorcio Pacavira De Matos said the agreement will enhance trade, improve market transactions and the movement of people and goods.

Ms De Matos said the agreement will also foster public and private investments between the two countries.

The agreement is intended to make Angola one of Zambia’s largest export markets and further create an opportunity for investment, competition and innovation for the private sector, thus, enhance job and wealth creation in areas such agriculture, tourism, energy and construction.

The trade agreement has provided a list of products that will be exempted from custom duty.

The agreement will further compliment other initiatives such as the development of the Lobito Corridor, which is aimed at renewal of the Benguela Railway Line which was commissioned last year.

Angola has lost some 60,000 jobs in the past 12 months due to the economic crisis triggered by the falling international oil prices, according to the latest statistics by the Angolan Industrial Association.
Most of the job losses occured in the civil engineering and oil sectors with state revenues reduced by half from June 2015 to May 2016, said Jose Severino, chairman of the Angolan Industrial Association in an interview with foreign journalists.
The business leader believed the Angolan economy would improve as international oil prices bounced back.
“Oil prices are rising and the economy will be running in a new macro-environment,” Jose Severino said.

He said the International Monetary Fund was also expected to provide economic assistances to Angola to raise its credit ranking and improve the financial conditions of the African country.
The inflation rate, which officially stood at 26 percent in the past 12 months, would help Angola to export more of its oil, diamonds, farming products and construction materials.
However, the country needed to re-establish a stable supply of foreign currencies to buy raw materials and equipments for the industrial sector, the chairman said.
He called on the Angolan government to put in place stricter control and management over the shrinking foreign currency reserves and to re-establish a direct link between commercial banks and enterprises to channel more foreign currencies to the industrial sector.