TAX collection is a key component of a government’s legitimacy when raised and managed responsibly in order to have a significant impact particularly to the provision of better and affordable services to the large part of the population still living in abject poverty. In this fiscal year, Tanzania Revenue Authority (TRA) is planning to boost revenue collections to about 8.3tri/- and projected to reach 18tri/- in five years period.
Tanzania Revenue Authority (TRA)
During the five years period, the macro-economic outlook assumes that real Gross Domestic Product (GDP) will grow at an average of 8.3 per cent and nominal GDP at 14 per cent. The taxman aims to increase revenue yield to 19.9 per cent.
The outstanding performance will be achieved through improving efficiency in tax administration and widening the base in order to collect more revenues especially from specialised sectors like mining, oil and gas. There is close linkage between taxation policy and its administration and the impact of tax systems on investment, economic growth and poverty reduction especially in the least developing countries (LDCs).
“All revenues collected should be put into good use and especially for poverty reduction,” said a visiting Denmark Ambassador, Under-Secretary for Consular Services at Ministry of Foreign Affairs of Denmark, Ms Charlotte Slente.
However, one of the challenges haunting tax regime in the country has for long been unnecessary exemptions which has reached 1.8tri/-, as pointed out in the report of the Controller and Auditor General (CAG).
The exemptions during the period under review represent 18 per cent of total government revenues, up from 1trl/- during the financial year 2010/2011 which represented 8 per cent of total revenues. Denmark, one of the development partners has called upon the government to intervene and cut down tax exemptions to boost revenue collection.
Ms Slente said TRA was doing commendable job but called for further improvements to boost collections that would ultimately help in the war against poverty in the society.
Despite high economic growth registered by the country in recent years, she said more efforts are needed to translate the development as weapons to fight poverty and create equality.
“As development partners, we would like to see more positive impacts of the donor aid and domestic revenues in relieving the poor from abject poverty,” she remarked. To avert the alarming situation, the CAG, Mr Ludovick Utouh, announced last week that tax exemptions to various investors will from the 2013/14 financial be audited to ascertain whether they are of importance to the national economy.
He recommended that all contracts with exemption clauses should be reviewed by the Attorney General (AG) for legal advice before they are signed. Ms Slente, who is leading a delegation from Denmark, said during their stay they will meet the Finance and Economic Affairs Minister, Dr William Mgimwa and the Governor of the Bank of Tanzania (BoT), Prof Benno Ndullu.
She said during their visit in the country where five year development cooperation with Tanzania was signed and held discussions on commercial relations and the general budget. Denmark provides to Tanzania about 80 million US dollars (128bn/-) annually.
The Danish Ambassador to Tanzania, Mr Johnny Flento said if Tanzania could raise monthly revenue collections by just one per cent of the Gross Domestic Product (GDP), there could be significant improvement of social services delivery.
The TRA Commissioner General, Mr Harry Kitilya, told the delegation that those who are given exemptions are asked to provide justifications and evidences as well as identifying the beneficiaries.
“There are ongoing improvements including revision of tax laws aimed to cut down unnecessary exemptions and those remaining be quantified for the benefits of the country’s development,” he noted.
He added, “If we reduce tax exemption and improve revenue collections, obviously real economic development will be realised,” In a bid to expand tax base in order to boost revenue collections, TRA last week launched the second phase of the Electronic Fiscal Device (EFD) targeting 200,000 business people with an annual income of at least 14m/-. The TRA Deputy Commissioner General, Mr Rished Bade, said the machines will boost revenues and reduce cost collections.
The Commissioner for Domestic Revenues, Mr Patrick Kasera said lack of knowledge, few distributors and manufacturers were among the few challenges met in the first phase of the EFD operations. In the second phase then, TRA has increased manufacturers to eight from four and distributors to 11 from six, to ensure the gadgets reach businesses all across the country.
