Tanzania’s poultry sector eyes tax reforms for industry growth  

TANZANIA – To enhance food security, stimulate economic growth, and make poultry products more affordable, Tanzania is exploring tax reforms that could reshape the future of its poultry sector, according to Alpha Ngunyale, the Executive Secretary at Tanzania Commercial Poultry Association. 

Central to this discussion are mechanisms like zero-rating and tax exemptions under the country’s Value Added Tax (VAT) framework, governed by the VAT Act of 2014.  

Zero-rating involves charging a 0% VAT rate on certain goods or services while allowing businesses to reclaim VAT on inputs used in production. This lowers production costs and, by extension, consumer prices. 

Conversely, tax exemptions remove VAT on specific goods or services but prevent businesses from recovering VAT paid on inputs, often resulting in higher production costs.  

Tanzania’s VAT stands at 18% on the mainland (15% in Zanzibar) and applies to most taxable supplies unless exempted or zero-rated. 

While some unprocessed agricultural products, like live poultry or raw eggs, might be VAT-exempt, producers still face elevated costs because they cannot reclaim VAT on inputs such as feed, equipment, or housing.  

The poultry sector holds immense potential in Tanzania’s economy. Its ability to create employment, boost exports, and link with other sectors transforms it. 

However, significant hurdles remain in making the sector more competitive and profitable, which is crucial for attracting investment and improving production efficiency.  

Regulatory and tax reforms could address these challenges, with zero-rating parts of the poultry value chain emerging as a viable strategy to unlock growth and impact livelihoods.  

Potential benefits of zero-rating the poultry sector include:

Economic gains  

Zero-rating key poultry inputs like feed, day-old chicks, and equipment could significantly reduce production costs, making poultry farming more profitable. Lower costs would likely translate to reduced consumer prices, making chicken and eggs more affordable, particularly for low-income households.  

While zero-rating may initially reduce VAT revenue, the anticipated economic expansion could offset this through higher corporate taxes, increased exports, and job creation. The poultry sector could also improve Tanzania’s trade balance by reducing dependency on imports.  

Social impacts  

By combating protein deficiency, Affordable poultry products can improve nutrition, particularly for children and vulnerable populations. 

The sector’s growth could create jobs for over 770,000 Tanzanians and indirectly benefit thousands more in allied industries like farming, logistics, and processing.  

Competitive edge  

Lower production costs would enhance Tanzania’s competitiveness in the East African market, paving the way for increased regional exports.

Affordable prices could open up new domestic and international markets, encouraging producers to invest in advanced, bio-secure poultry systems, further enhancing efficiency and quality.  

Addressing revenue concerns  

Concerns about potential VAT revenue losses from zero-rating are valid but likely manageable. 

Historical analyses suggest that such losses can be offset by gains in consumption, production efficiency, and increased corporate tax revenues. 

Moreover, the long-term social and economic benefits, including improved food security, higher employment rates, and reduced malnutrition, outweigh the short-term fiscal adjustments.  

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