Civil Society Comments on the Proposed Revenue Management Act 2015

 CIVIL SOCIETY COMMENTS ON THE PROPOSED REVENUE MANAGEMENT ACT 2015

 Dodoma, June 24 2015

Part Section Key  Issues Concern CSO Recommendation
 

II

 

4.

Functions of the Minister Although this is set out as ‘functions’. This could be strengthened. A stronger language would responsibilities and obligations. The “Minister is responsible for overall management for the Fund”.
 

 

5 Timing of reporting The timing not specified,  Insert a provision that reads “the report on the performance shall be published quarterly on the Bank’s website no later than 30 days after the end of the quarter”
9.   Sources of the Oil and Gas Fund Not exhaustive list of sources Include:

(f) capital gains tax from sale of ownership at any stage of development and

(g) any sale of government participation.

12(3) Portfolio Investment Advisory Board a.      A stronger process is needed to ensure the integrity of the appointments.

 

b.      The size of the Board does not guarantee a minimum quorum (2) for credible decisions

“The Chairman and other four(six) members shall be proposed by the Ministry of Finance, in consultation with the Governor and appointed by the President.”

 

Increase from 5 to 7 (minimum of 3 and the chairperson)

12 (4) Portfolio Investment Advisory Board The names of the Board should be a matter of public record. Insert subsection (5) The Minister shall publish the names of the Board members as soon as an appointment is made or there has been a change in membership.
13(1) Functions of the Board

 

The Bill does not specify obligations for the board to use specific criteria/instrument in advising the minister on investment strategy. The Bill should specify an instrument strategy based on ‘eligible instruments’ for investment. Eligible instruments should be defined in the Bill (see note for examples). Importantly, this should prohibit domestic investment of the Fund. This would help sterilize the inflow of capital and minimize the risk of macroeconomic challenges, sometimes called “Dutch Disease”.

 

13(3) (3) Where the Minister declines to take the advice of the Board he shall refer the matter to the President for determination. (3) The responsibility for the management of the Fund sits with the Minister. Therefore any decision should take into account the deliberations of the Board but ultimately the final decision should rest with the Minister. Should be removed as the investments to be made in the Fund are likely to be fairly low risk and diversified therefore this should not require the involvement of the President.
15(1) The Governor shall report quarterly to the Minister on the governance and overall performance of the Revenue Holding Account and Revenue Saving Account of the Fund.  

 

Lacks clarification on the timing of and publishing of reporting.

 

Strengthened by clarifying timing such as “the report on the performance shall be published quarterly in the Gazette and on the Minister of Finance’s website no later than 30 days after the end of the quarter”.
15(2) The Governor shall report quarterly to the Minister on the governance and overall performance of the Revenue Holding Account and Revenue Saving Account of the Fund. Strengthened by clarifying timing such as “the report on the performance shall be published quarterly in the Gazette and on the Bank’s website no later than 30 days after the end of the quarter”.
15(3) (3) The Controller and Auditor General shall make quarterly audit of the reports submitted under subsection (1) and (2). To be strengthened by clarifying timing such as “the report on the performance shall be published no later than x months after the publication of (1) and (2) in the Gazette and on the Ministry of Finance’s and or CAG’s website”
 
PART IV: FISCAL RULES General: Central to Tanzania’s proposed fiscal rules is the country’s GDP forecasts. Timing of forecast, publishing the forecast

 

The government may wish to consider the use of the non-resource GDP in the fiscal rules if GDP is likely to be more volatile than non-resource GDP. The responsibility of the GDP forecasts will need to be defined. Such as

(1) GDP estimates for the fiscal rules will be determined in March every year by the Ministry of Finance to inform formulation of the Budget.

(2) Forecasts will be published in the gazette and the Ministry of Finance website.

(3) The Ministry of Finance may commission an external review of the forecasts from a independent and reputable agency within 30 days, which will also be made available in the gazette and the Ministry of Finance website.

17.-(1) (b) (b)            maintenance of fiscal deficit excluding designated oil and gas revenue at 3% of the GDP when such revenue attains a level of at least 3 % of the GDP; Lacks clarity as to whether this provision means the government must always run a non-resource deficit of 3% or this refers to the limit?

 

 

This needs to be clarified such as: “maintenance of fiscal deficit excluding designated oil and gas revenues at 3% of the GDP from such a time when revenues attains a level of at least 3 % of the GDP until a time when revenues fall permanently below 3% of GDP”.

 

17-(1) (c)(i) All designated revenue are deposited into Revenue Holding Account where- Lacks clarification on the timing of transfers into the consolidated fund This will help orderly management of oil and gas revenues.

 

For example: “transfers from the Revenue Holding Account equivalent to one quarter of the budgeted oil and gas revenue financing should be transferred into the Consolidated Fund”

 

 

 

 

  (aa)      in any fiscal year, at most an amount equal to 3% of the GDP is transferred to the Consolidated Fund for budgetary use, and at least 60% of such transfer is dedicated to funding strategic development expenditure including human capital development, particularly in the area of science and technology; The requirement to invest in strategic development expenditure can cover the full spending worth 3% of GDP and need not be limited to 60% of this amount.

 

This provision can be strengthened. Potential options to strengthen this may be:

 

(cc)Every xx years the government will prepare and publish a plan for the use of oil and gas revenues identifying priority areas and financing targets that are linked to a national development plan and aligned with the Medium Term Expenditure Framework.

 

(dd)The use of oil and gas revenues for each Ministry will be presented in Budget Appropriation Bill for consideration by parliament.

 

(ee) Details of the government’s use of oil and gas revenues in the previous financial year will be included in an annual report on the Oil and Gas Funds.

  (bb)      any amount of money in Revenue Holding Account which is in  excess of 3% of the GDP is automatically transferred to the Revenue Saving Account; Lacks important clarification on the timing. This provision does not guarantee this if transfers are regularly made to the Consolidated Fund. Specify quarterly transfers at the same time that transfers to the Consolidated Funds are made. “Any money in the Revenue Holding Fund in excess of the budgeted 3% of GDP will be transferred to the Revenue Saving Account once quarterly”.
  (ii)        in the event the designated oil and gas revenue falls short of 3% of the GDP in any particular fiscal year, money sufficient to offset the shortfall in the budget should be drawn from the Revenue Saving Account and deposited to the Consolidated Fund, The withdrawal rule also needs clarification. Withdrawals should not be allowed when oil and gas revenues fall permanently below 3% of GDP. This could be strengthened by some long-term provision for the fund. Insert (iii) “Once oil and gas revenues fall permanently (as resource approach depletion point) below 3% of GDP withdrawals should not exceed the earnings on the Revenue Savings Account”.
17(1) (e) (e)            availability of fund for investment by National Oil Company Tying funding of the National Oil Company (NOC) to 0.1% of GDP does not ensure that the NOC receives a share of revenues that is appropriate given its objectives or an amount that it has the capacity to spend. It also ties NOC financing to GDP which may at points increase rapidly, pushing up NOC revenues, when the capacity to spend my not be there. Earmarking revenues in the Revenue Savings Account while trying to maintain the Funds aims for stabilisation and long-term savings will be difficult. This is because it ties Tanzania’s long-term savings to NOC financing. The financing of the NOC can provided though the consolidated fund (budget) or even deducted from the holding fund in advance. This can ensure that savings accrued in the Revenue Saving Account

can focus on other aims of stabilisation and building long run savings.

Consider an option of adopting multi-year financing agreement or a rule-based approach (perhaps with a cap).

 

This could be set at a maximum of retained earnings and related to various performance benchmarks.

 

 

  (ccc)    the request is proposed by the Minister responsible for energy and approved by the Minister for Finance before submission to the National Assembly.

 

 

 

Given that the NOC will be using a significant share of petroleum revenues or savings the Bill would be strengthened by making reporting and transparency requirements for the NOC. For example: Insert  the following provisions:

(iv) within one month of approval by parliament the NOC’s annual budget should be published on the NOC’s and Ministry of Finance website.

 

(v)Audited accounts will be submitted to parliament and also published on the NOC’s and Ministry of Finance website before the end of the second quarter of the year.

 

(vi) A report on NOC spending for the previous fiscal year covering revenues, costs, revenue flow between NOC and the state, production, plans, results of oil trading and quasi-fiscal activities should be published before the end of the first quarter of the year. This should be submitted to parliament and published on the NOC’s and Ministry of Finance’s website.

17(1) The Bank shall report on the operational performance of the Fund and publish an audited report in the official Gazette and website of the Bank. Lacks specificities with regards to closing balances of the funds, timing and reconciliation.

 

 

a.    The closing balances of the funds should also be presented etc. This should include details of spending of oil and gas revenue for the same period.

b.      The balance of revenues received should be presented next to inflows and outflows from the fund.

c.       The report should also be presented to Tanzania Extractive Industries Transparency Initiative (TEITI) for consideration.

Leave a Reply