Tanzanian Ministry of Finance

=Background= The Ministry of Finance (MoF) manages the overall revenue, expenditure and financing of the Government of the United Republic of Tanzania (URT). It provides the Government with advice on the country’s broad financial affairs in support of economic and social objectives. The Bank of Tanzania (BoT) and the Tanzania Revenue Authority (TRA) are some of the established institutions that work under the MoF. The MoF was established by Act of Parliament No. 11 of 1995, and started its operations in 1996. It is regulated by law and is responsible for administering impartially various taxes of the Central Government. The revenue authority is an executive agency under the MoF.

=Roles and Functions of the MoF=

Budget Preparation and Expenditure
The MoF prepares and presents the National Budget to the Parliament in June every year. The Budget contains a master plan for the Government’s fiscal revenue, expenditure, financing policies and plans to be undertaken in the stipulated fiscal year. Expenditure allocations to different Government institutions are determined by the MoF.

Revenue Collection and Fiscal Developments
Certain levies and fees are collected as revenue by the Ministry of Finance itself and by other Government Ministries and institutions such as the Ministry of Energy and Minerals in form of royalties from exploration and production companies and fees for geological mapping.

Policy and Legislation
The Ministry formulates and manages revenue policies and legislations that are presented to Parliament. Its other roles include developing tax policy and legislation and managing Government borrowings in financial markets, developing regulatory policy for the country’s financial sector in co-operation with the BoT and representing Tanzania in international financial institutions.

=MoF and Natural Gas Development= According to the 2012/2013 budget, the Government of Tanzania prioritised investing in the energy infrastructure, specifically the construction of the Mtwara-Dar es Salaam Gas Pipeline. Also drawn are policies on promoting national income to mitigate the high cost of living through the development of alternative energy production using natural gas and exempting on various equipment relating to natural gas that will be used for the storage, transportation, and distribution of natural gas from Value Added Tax (VAT). On behalf of the MoF, the TRA reported that tax exemptions for multinational companies engaged in exploration of natural gas and oil —both offshore and onshore the Indian Ocean— stood at US$58.82 million (Tsh100 billion) whereas projects undertaken by state-owned firms enjoyed the waiver of US$86.47 million (Tsh.147 billion). The MoF, as a stakeholder in oil and gas development, is tasked with setting up a state-owned fund - the Tanzania Natural Gas Revenue Fund - now that Tanzania is set to increase its revenue by US$3billion a year from more than 50.5 trillion cubic feet of proven natural gas reserves. The fund will be established by a specific legislation. The goal is to ensure that the legislation has sound institutional and governance sections. Therefore, the law should provide a clear structure and legal form of the Gas Fund, including how it would interact with the BoT, the MoF and any public auditing body. Moreover, there is a need for the MoF and the government to formulate legislation on Petroleum Revenue Management akin to other oil and gas producing countries. Delays in the enactment of the law will have serious repercussions for the country’s income as it can result in oil and gas producing companies not paying any tax or paying very little, especially if the tax legislation is not synchronised with the Production Sharing Agreements (PSAs).

=Monitoring and Evaluation= The Ministry monitors fiscal developments during the year and reports to Parliament. Any deviation from the master plan is then identified by the Controller and Auditor General (CAG) who files a report on the non-conformity after the expiry of the fiscal term. In the oil and gas sector, the main responsibility for monitoring and evaluation framework is vested in the hands of the Tanzanian Ministry of Energy and Minerals (MEM), but the MoF, as a key stakeholder, is part of a co-ordination mechanism established to foster transparency and rightful expenditure of devolved funds.

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