Tanzania cuts income tax but rules out public sector pay rises

Tanzania’s president has cut income tax to help workers deal with the economic effects of COVID-19 but refused to increase public sector pay, which has remained static for nearly six years.

In a speech commemorating International Workers’ Day, Samia Suluhu Hassan said the move, reducing the pay-as-you-earn levy on salaries from 9% to 8%, will “improve the welfare of the workers”.

The change, which will come into force at the beginning of the new fiscal year in July, comes a year after her predecessor reduced the rate from 11%.

Samia Suluhu Hassan blamed Covid-19 for keeping public sector pay frozen for another year, after the virus helped knock GDP growth from a projected 6.9% to 4.7% in 2020.

“I am aware that workers’ salaries have not been increased for approximately six years in the public sector and eight in the private sector,” she said, according to Tanzania Daily News.

“I personally wish that your salaries increased this year, but unfortunately I have failed to fulfil your expectations.”

She promised pay would increase next year.

Suluhu, who took office in March after the death of John Magufuli, has said she wants to enact reforms to make Tanzania’s economy more business friendly to drive growth.

The east African country was recognised as reaching ‘lower-middle-income’ status by the World Bank in July last year, after gross national income per capita increased to $1,080.

Its economy has suffered during Covid-19 because of lower tourism and exports, and although the government did not impose lockdown measures – Magulfuli was sceptical of the pandemic – people and businesses have been cautious, reducing domestic spending.