The Citizen (Dar es Salaam)
Damas Kanyabwoya
29 June 2009
Dodoma — The Government, faced with a growing budget deficit after it was arm-twisted to re-introduce some tax exemptions it had scrapped in the 2009/10 Budget, has outlined a preliminary plan to close the gap.
Finance and Economic Affairs minister Mustafa Mkulo is expected to announce the complete plan after a taskforce appointed to work on the issue submits its proposals.
But in a recent exclusive interview with The Citizen in Dodoma, his deputy, Mr Omar Yusuf Mzee, outlined the basic contours of the plan to fill the estimated Sh45 billion budget gap.
The plan would raise the much-needed additional revenue through a crackdown on tax exemption abusers, mostly religious organisations, and Value Added Tax (Vat) evaders.
Mr Mzee said by embarking on a well-planned crackdown on wayward religious institutions alone, the Government would recover at least 30 per cent of the money that would have been lost through abuse of tax exemptions.
"If we are going to get quick results, these are just some of the things we will be doing. But a more concrete plan whose outcome is too early to predict, will be announced after the taskforce completes its job," he said.
The deputy minister said the Government would also cover the gap through enforcing the use of tax register machines to reduce the amount of revenue loss in VAT payments.
Mr Mzee said there was no plan to fill the shortfall by increasing taxes in other areas but the measures would target revenue sources where billions of shillings are traditionally lost due to a number of factors.
The measures would include increasing efficiency at the Dar es Salaam Port, which has for a long time caused the Government significant losses annually due to costly cargo-clearance delays, and curbing fuel adulteration.
A recent study shows that the Government loses about Sh10 billion each year due to widespread oil adulteration.
"We cannot over-burden taxpayers because they are already suffering from the effects of the global crisis, but our plan is to target these areas where we traditionally lose a lot of money,"said Mr Mzee.
Following pressure from various quarters, the Government re-introduced tax exemptions granted to religious institutions, and on processed tea and coffee, just before the Parliament passed the Finance Bill of 2009.
Religious leaders, legislators and members of the public opposed Mr Mkulo's proposals to cut the tax waivers on religious institutions saying the move would seriously affect social service delivery.
Economic analysts have also urged the Government to embark on a deliberate crackdown against tax evaders and abusers of tax exemptions, but predicted it would be difficult closing the budget gap.
Some warned the Government against adopting "desperate measures" such as increasing taxes on sensitive but key potential revenue areas like petroleum.
Prof Humphrey Moshi of the University of Dar es Salaam's Economic Research Bureau (ERB) said he was "certain and pretty sure Mkulo will not touch the petroleum sector".
"The estimated Sh45 billion loss can easily be obtained through proper management of all tax exemptions," he said.
Dr Honest Ngowi, an economist at Mzumbe University, said to close the budget gap, the Government should cut unnecessary expenses.
And Mr Felician Busigara, a tax and management consultant said there were only two things to be done to cover the shortfall: boost revenues or cut expenses.
"But in this case the Government must do both. It has to cut spending and at the same time, work to become more efficient in tax management through sealing the loopholes some individuals and organisations use to evade tax," he suggested.
Other experts say efforts to fill the deficit will be futile if the Tanzania Revenue Authority (TRA) does not work to surpass its revenue collection targets to finance the bloated Sh9.5-trillion Budget.
There are also hopes the Sh1.7-trillion economic stimulus package President Jakaya Kikwete unveiled early this month would boost Government revenue in the long run.
The package, contained in the 2009/10 Budget, will see funds channelled towards reviving key sectors such as agriculture, tourism and infrastructure amid the global economic crisis.
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