Under the Local Government Finances Act No. 9 of 1982, Local Government Authorities (LGAs) are allowed to charge crop cess, which should not exceed 5% of the farm gate prices. LGAs are mandated by this Law to develop By-Laws that govern the collection of crop cess in their Councils.
However, the whole concept of “crop cess” is very controversial. Apart from the fact that the cess rates charged by many LGAs are too high, the administration of crop cess is cumbersome and inequitable across LGAs. Cess rates vary from one LGA to another. For example, in some Districts, crop cess is charged as a percentage of the farm gate price, but in other Districts, it is charged as a fixed amount, say TZS 2000 per bag of maize. For those Districts that use percentage, charge 5%, others 4%, and others 3% on the same crop.
Now, to answer the question, variability in cess rates have a huge effect on the competitiveness of the crops in the market area. In other words, if the same crop, say maize, is charged different cess rates across Districts, traders would prefer to buy the crops from areas where the cess rates are lower. Farmers in areas that charge higher cess rates lose revenues or are forced to sell at lower prices. Traders also suffer because part of their profit margins is lost in higher cess rates.
Crop cess should simply be abolished. If it can’t be abolished, then it should be greatly reduced (to below 1%) and there should be harmonization of cess rates across all LGAs. The Local Government Finance Act No. 9 of 1982 should then be amended to reflect this (reduction and harmonization).