Faith-based schools, colleges, hospitals and other institutions in Tanzania stand to lose their existing special relief on value added tax (VAT) under proposals contained in the 2009-2010 budget presented by finance minister Mustafa Mkulo.

The new measure, which would come into effect from July this year, to mitigate the shortfall in revenue due to tax exemptions, which accounted for 3.5 per cent of gross domestic product in 2007-2008 according to the finance minister.

The measure has met with mixed reactions, with supporters arguing that many private religious institutions are already at an advantage by charging more for their services than their state-run counterparts. Instead detractors have raised concerns about the possible impact of the move on essential services such as health and education especially to the most vulnerable members of society, which are often provided by faith-based organisations.

Other provisions contained in the budget include lowering VAT from 20 per cent to 18 per cent and lifting many of the existing tax exemptions for mining companies in Tanzania. However, controversially this measure would only apply to companies entering the country after 1 July and not to those that already have operations in Tanzania.

The budget comprises a Tsh9.5 trillion package with a special emphasis on agriculture, education, infrastructure, health, water and energy.

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