4. CHARGES - TANZANIA MAINLAND

4.1 Description

This section describes the nature of charges made on the fishery under two categories: those accruing to the central government (via the Fisheries Department) and those accruing to local government. Detail of the revenues collected are presented in section 4.3.

Accruing to the central government

The charges that the Fisheries Department can impose on the fishery are set out in the Fisheries Act No. 6 of 1970, last amended in June 2000, and are centred on vessel licensing and export royalties. In almost all cases of vessel licensing, preferential charges are imposed on those who invest in shore based processing facilities (an average discount of 30 percent for nationally flagged vessels and 60 percent for foreign vessels). Charge rates for foreign vessels are significantly higher than those for nationally flagged, averaging about 60 times the national rate for companies without shore based processing and 17 times the national rate for those with shore based processing. Detailed charge rates are presented in Appendix Table 1.

Vessel registration (>11 m)

All fishing vessels are subject to once-off registration, and the registration of fishing vessels larger than 11 m overall length or more than 20 GRT can only be sanctioned by the Fisheries Department. and payment is made via the region's fisheries officer.

^/a Tanzanian vessel
^/b Foreign vessel
^/1 with shore-based processing facility
^/2 without shore-based processing facility

Rates are set via regulation to the fisheries act and vary with vessel size, type, flag and shore infrastructure. Preference is given to nationally registered vessels and those whose owners have approved shore-based fish processing facilities.

There are relatively few entrants into the fishery, and vessel registration does not represent a significant revenue stream for the sector. In addition, all of the shallow water shrimp fleet is nationally flagged and the corresponding registration rates are very low (max US$298 for a vessel >300 GRT).

Vessel licensing (>11 m)

Vessel operators must purchase annual vessel licence and those for vessels greater that 11m can also only be issued by the Fisheries Department. Rates are set via the fisheries act and vary with vessel size, flag and shore infrastructure.

^/a Tanzanian vessel
^/b Foreign vessel
^/1 with shore-based processing facility
^/2 without shore-based processing facility

Although this is a continuous revenue stream, it does not bring significant benefits on account of the low charge rates and the small size of the fleet of vessels larger than 11m - there are currently only 27.

Fishing licence

An annual fishing licence for each vessel must be purchased and again, those for vessels greater than 11 m or 20 GRT can only be issued by the Fisheries Department. Fishing licences are charged per GRT and rates vary with vessel size (GRT), flag, fishery and shore infrastructure.

^/a Tanzanian vessel
^/b Foreign vessel
^/1 with shore-based processing facility
^/2 without shore-based processing facility

The annual fishing licence is the principle mechanism for control of effort in industrial fisheries and only a limited number are sold each year. In the shallow water shrimp fishery for example, the management cycle includes periodic recommendations from the research institution (TAFIRI) of the number of fishing licences that should be issued. Note that there is no catch limit or quota associated with any fishing licence.

The sale of annual fishing licences represents a small but consistent revenue stream. The shallow water shrimp fleet is composed exclusively of nationally flagged vessels, with an average size of 115 GRT. Assuming that none have shore based processing facilities; this would imply annual revenues in the order of around US$28 000.

The licensing of finfishing vessels for EEZ waters has recently become a significant revenue stream, and up to October 39 licences had been sold in 2003, earning over US$700 000.

Export royalty

The fisheries act sets out an export royalty, payable on the export of any fisheries product. The royalty is collected by the Fisheries Department, and export documentation requires the inclusion of a receipt showing payment of royalty. Export royalties are perceived as a resource rent, accruing to the state, the de jure owner of the resource. Charges are made on a per kilo basis in all cases except for seashells and aquarium fish, which are charged ad valorem. In the case of shrimp, export royalty is reduced by about six percent for product processed ashore. Charge rates are set at what is estimated to be six percent of FOB value, but charged per kilo rather than ad valorem in an attempt to reduce evasion through under-invoicing.

Export royalty is the principle source of revenue generation in the sector, earning close to US$4 millions in 2002. A total of 84 percent of export royalty was collected from the export of Nile perch products, and 10 percent from export of marine shrimp.

Accruing to local government

At the time of writing local government revenue collection in all sectors had just undergone fundamental changes as a result of the 2003 budget speech (see footnote 1, page 3). In an attempt to reduce double taxation and remove "nuisance taxes" the Minister abolished many local taxes which had previously accrued to local government. On the surface, this appears to be a step backwards in the decentralisation strategy that the current government has been pursuing as, with the reduction of the local tax base, the central government will probably be obliged to resume direct support to local government from central funds.

Annual vessel licences and fish levy continue to be charged, but amongst those instruments abolished which earned revenue for local government from the fisheries sector are: fisher licences, vessel parking and landing fees, service levy (industrial cess). It must however be noted that there continues to be some uncertainty as to exactly how the Minister's speech is to be interpreted in practice.

Annual vessel licence

Vessel licences fees for small fishing vessels are collected by district fisheries officers and accrue to local district councils. In principle the rate charged is that set in the fisheries act (US$1.2 per year), but in practice local councils set their own rates via local bye-laws. Annual vessel licences around Lake Victoria varied in cost between US$1.0-3.8 (LVEMP 2001a). Vessel licence fees could provide reasonable income for local government, but not only are rates low, but also collection is expensive and coverage low. Estimates from Lake Victoria indicate that only 43 percent of vessels pay annual vessel licence, and collection costs frequently exceed collected revenue.

In the light of the abolition of other tax sources, it is reasonable to assume that more revenue will be extracted from the remaining sources, and thus annual vessel licence fee rates will probably rise.

It should be noted that although the annual vessel licence fee is potentially an instrument for effort management, to date it does not yet serve that purpose in artisanal fisheries. The issuing of annual licences for artisanal vessels is not limited in any way, either in marine or freshwater fisheries, including Lake Victoria.

Fish levy

Fish levy is a tax payable on the sale of fish, usually by the buyer. The Minister's June 2003 budget speech retained product/sales taxes, and fish levy continues to be charged by local governments under this clause. Prior to June 2003, local governments were able to decide their own rate of levy, and also levy fish passing into the district which had been already taxed in another district. Rates of charged on Lake Victoria varied between US$0.006 to US$0.012 per kilo (about 1.5 percent to 3 percent of landed value) and this could be charged up to four times between fisher and processing factory. The charge is now capped at five percent of landed value (corresponding to US$0.05/kilo for Nile perch at current beach prices), and can only be applied once.

The common method of collecting fish levy is via private agents contracted to the local council. The agent bids a fixed price for the right to collect specific revenues on behalf of the local council and, should his bid be successful, is then bound to pay the council the bid price every month. Tax collected is the agent's revenue, and any collection in excess of the bid price is the agent's profit. Should the agent fail to collect revenue equal to or greater than the bid price, then he will make a loss. The system has advantages for the local government as there are no administrative costs (the agent has to bear these), and revenue streams are both known, consistent and dependable. The major disadvantage is that the mechanism for awarding contracts is not well developed and lacks transparency, as a result of which agents may win contracts on the basis of low bids, permitting super-normal profits. There is thus a very significant different between what is charged to the fishery and what is received by local government - only an estimated 40 percent of collected revenue is passed to local government, the remainder being the agents' profit and operating costs.

It should be noted that agents are extremely efficient at collecting revenue, and rates of coverage of fish levy are as high as 95 percent (LVEMP 2001a).

4.2 Origin, purpose and legal status

4.3 Revenues raised

Central revenues

Detailed breakdown of revenues accruing to central government is given in Appendix Tables 8 and 9 and summarized in the figures below. In 2002, the FD collected US$6.85 millions, 97 percent of which came from export royalties. Of the revenue collected from export royalties, 85 percent was from the Nile perch fishing industry on Lake Victoria.

Figure 1 - Collected revenues (mainland)

Source: FD

Figure 2 - Export royalty (mainland)

Source: FD

The drop in revenue from royalties in 1999-2000 was a direct result of the EU ban on the importing of fisheries products from Tanzania, imposed in 1999 and lifted early 2000. As mentioned above, for 2003 there has been a significant increase in the number of EEZ licences sold, and licence revenues will exceed US$0.78 million, compared to US$0.23 million in 2002.

When FD data on collected revenue is compared to that of the Ministry of Finance on revenue received from the fisheries sector, there are some significant divergences. Assuming revenue flows to be more or less consistent across months, an estimate can be made of collection on per financial year (July-June). The Ministry of Finance data (Table 5) indicates that they received significantly more from fisheries than fisheries records show was collected. The discrepancy is of such a size (US$2.50 m in 1999/0) that it is difficult to attribute it to data inaccuracies. Ministry of Finance data thus indicates that the contribution of fisheries to government spending is significantly more than the sector's data suggests.

Table 5 - Collection by fiscal year (mainland) - in US$ millions

Source: FD

Source: Ministry of Finance

A brief analysis of how centrally collected revenue is disposed of is presented in section 6.

Decentralized revenue

The small amount of information that is available on decentralized revenue collection^[1] indicates that in the fisheries sector there is particularly poor coverage, with collected revenues between 28 percent (LVEMP, 2000a) and 31 percent (IUCN, 2000) of estimated maximum revenues.

Table 6 - Estimate of decentralized revenue collection (mainland)

Source: Vessel numbers and catch values for 2002: FD, Table 14

As described in section 3.1, the principle fiscal instruments in use at district level are vessel licences and fish levy. Using an average annual vessel licence fee of US$2.0 per vessel (LVEMP, 2001a) and the current maximum sales tax of five percent of landed value, it is estimated that US$1.49 millions per year accrues to local governments from the fishery. Of this, 99 percent is from fish levy, and 62 percent of the total is estimated to be from freshwater fisheries.

Prior to 2003, locally collected revenue may have been up to 12 percent higher, reflecting the broader tax base available to local government before the current budget.

Overall

For the year fiscal year 2001/02, total production is estimated as 338 000 tonnes, with a landed value of US$98 millions. A total of 33 000 tonnes of fish products were exported, with an FOB value of US$93 millions. Total rent capture by the government (including central and decentralized levels) is estimated at US$8.85 millions, corresponding to 9.5 percent of export value or nine percent of landed value. This is considered to be quite high, especially as it includes no estimation for revenue accruing to the state via the TRA.

Tax revenue from the fisheries sector is estimated to contribute about one percent of total government revenue (1 040 billion T-shillings) for 2001/2, including non-tax revenue (BoT 2003)).

4.4 Impact of charges on the fishery

There are no signs of any significant changes in behaviour in any of the major fisheries (Nile perch, shallow water shrimp and EEZ) as a result of charges made to the fishery.

EEZ

The management of the EEZ fishery is just beginning to mature. Recent efforts through the SADC MCS project and other initiatives have resulted in an increase in the number of licensed EEZ vessels. It is however accepted that unlicensed vessels were already fishing the EEZ prior to the recent improvements in resource monitoring. Table 7 shows the evolution of the number of EEZ licences sold. At the moment current strategy is to maximize revenue from the EEZ, and the government is attempting to increase the sale of licences.

Table 7 - EEZ licences (mainland)

Source: FD

MCS systems for the EEZ are not yet well developed and the number of licences sold cannot as yet be taken as an indicator of the development of effort in the fishery.

Shallow water shrimp

In the shallow water shrimp fishery there is tendency of ever increasing effort, and a corresponding reduction in CPUE, as illustrated in Figure 3. Effort has been evaluated on the basis of a standardised fishing day, and the effort for non-standard vessels has been normalised on the basis of the product of GRT and HP. Although the method is theoretically valid, it will be compromised by mis-declaration of engine power^[2] and the use of differing methods to measure GRT. The fact that the licence fee increases with GRT and that there exists a 500 hp/150 GRT limit to trawlers in the fishery will evidently lead to some operators attempting under-declare either or both specifications.

The figure shows that there was a significant drop in effort in 2002, but with more licences than ever issued in 2003 (27), this is not considered to be a long-term trend. In the past years operators have reacted to changing conditions by increasing effort through the use of more nets and there was certainly no sign of a reduction of effort in 2000 following new (increased) licence fees. The increase in effort around 2000 could be partially as a result of increased access fees, but as the charges are small relative to gross revenue (less than 0.5 percent) this is considered to be unlikely.

Figure 3 - Effort and CPUE in the shallow water shrimp fishery

Source: All data from FD. Analysis under this study.

The latest TAFIRI mana-gement recommendation for the fishery proposed limiting effort to eight standard vessels (or equivalent). It is clear that implementation of such a measure would be difficult considering the present structure of the industry, and for the moment it appears that fisheries managers have chosen not to heed research advice. It is interesting to note that operators are beginning to become more involved in self-management of the resource and were reported to have voluntarily ceased fishing early in the 2003 season on account of low CPUE.

The contribution of small- scale shrimp fisheries to total catch and effort appears to be in general either underestimated or ignored in official statistics. A recent study in the Rufiji delta (REMP 2002) estimated that the artisanal sector supplied more than 2 000 tonnes/year of shrimp implying total catches (including the industrial sector) in excess of 3 000 tonnes/year (cf 2 000 tonnes/year in Appendix Table 6.). The contribution of small scale fisheries is becoming ever more important as commercial export-orientated links with the sector improve.

· Nile perch

In the Nile perch fishery the picture is similar, with continuously increasing effort and corresponding decrease in CPUE. Although there is no data available on total effort in the fishery (summing all gear types), taking the number of gillnets (the primary gear in the fishery) in use as an effort indicator, the development of effort and CPUE is as illustrated in Figure 4. Data for longline fishing effort, although considered by the FD less reliable, shows a 6 fold increase between 1998 and 2002.

Figure 4 - Effort and CPUE in the Nile perch fishery

Source: FD

There is no sign of any change in the fishery as a result of fiscal measures. Effort has developed following investment in the production chain by processing factories and steadily increasing producer prices. Recent changes in local taxation (which reduced local tax) may improve producer prices further, attracting more entrants to the fishery, which continues essentially open access without effort management.