A drastic change in the government policy protecting regional development banks against litigation will make it difficult for Tanzanian businessmen to lodge lawsuits against continental financial institutions.
The new policy announced last week in the Tanzania 2012/2013 national budget gives regional banks — spooked by the saga of the $100 million-plus award against the East African Development Bank — the assurance their exposure to lawsuits has been minimised.

(Read: Blue Line drags EADB to court again)

Minister for Finance and Economic Affairs Dr William Mgimwa said the government was making minor amendments in various tax laws and financial management laws to protect regional banks against nationalisation and litigation.

Dr Mgimwa said the government is proposing to amend the East African Development Bank (EADB) Act, Cap.231 with a view to providing immunity to properties owned by the Bank including houses, deposits, monies and bank accounts against legal proceedings, court decisions and nationalisations and acquisitions.

The new measures will be a big blow to the ongoing case at the High Court of Tanzania in which a Tanzanian transport company, Blueline Enterprises Company Ltd, is suing EADB for failure to settle a $137 million arbitration award.

(Read: Blueline award threatens existence of EADB)

The Tanzania High Court in November 2011 cleared the way for the regional development bank’s properties in Dar es Salaam to be auctioned and the proceeds paid to the Dar es Salaam based Blueline if the bank failed to comply with its order dated on May 2009.

The High Court appointed Mustafa Nyumbamkali of Super Auction Mart as a court broker for the attachment of the property in Dar es Salaam CBD, whose value has not been determined.

In its 2012/2013 budget the government said the EADB subsidiary in the country will also be given corporate status like the International Monetary Fund, the World Bank and the Africa Development Bank to enable it to be given priority when crises occur in the financial markets.

“The proposed measures also empower the Minister for Finance to implement the decisions of the EADB’s governing board, by amending the schedule to this Act through a government notice and subsequently informing Parliament,” said Dr Mgimwa.

Tabling the 2012/2013 national budget in Dodoma last week, the government said it is also proposing these measures to define the bank’s properties as including its houses and financial deposits entrusted to EADB for supervision.

Other protective measures include protection of local industries producing fruit juice against unfair competition from imported juices by way of an excise duty of Tsh83 ($0.052) per litre on imported fruit juices while locally produced fruit juices will attract excise duty of Tsh8 ($0.005).

The government is also imposing capital gain tax on sale of shares relating to a local company by the parent and offshore company to control tax avoidance.

Stephen Wasira, Minister in the President’s Office for Social Relations and Co-ordination, says that the government has made significant reforms in the tax structure aiming at widening the tax base and maximising domestic revenue.

Mr Wasira said the reforms include the amendment of tax laws, regulations and improvement of tax administration procedures.

“These measures have contributed to the improvement in collection of tax and non-tax revenues,” he said. However, there remains the challenge of increasing domestic revenues to reduce budgetary dependence on foreign aid. In that respect, the government will continue to undertake policy and administrative measures to improve revenue collection and tax administration.

In this financial year, the government will seek to spend Tsh15 trillion ($9 billion), out of which Tsh8,714.8 billion ($5 billion) will come from tax and non-tax revenue, equivalent to 18 per cent of the GDP. Local governments’ own revenue sources will contribute Tsh362.2 billion ($229 million) equivalent to 0.7 per cent of the GDP.

During the fiscal year 2012/13, the country’s development partners will continue to support the budget in the form of grants and concessional loans amounting to Tsh3,156.7 billion ($1.5 billion).

Out of this amount, Tsh842.5 billion ($333 million) will be general budget support and Tsh2,314.2 billion ($1.3 billion) will take the form of grants and loans for development projects including basket funds and Millenium Challenge Account funds.