Tanzania Daily News (Dar es Salaam)

13 June 2012

Tanzania: Trillions 'Lost' in Capital Flight

TANZANIA loses one billion US dollars (approximately 1.6tri/-) each year from tax evasion, capital flight and incentives offered to local and foreign investors, according to a new report launched in Dar es Salaam on Tuesday.

The amount in question is almost two times the 621.6bn/- budget for water during the current fiscal year. Reached for comment on Tuesday, the Tanzania Revenue Authority (TRA)'s Commissioner General, Mr Harry Kitilya, said he could not comment on the findings of the report as he had not seen it.

"I have not seen the report and thus I am not in a position to comment on its findings," said the TRA's boss in a telephone interview.

The 68-page report titled; "The one billion dollar question: How can Tanzania stop losing so much tax revenue," shows that a vast amount of potential tax revenue that could be used to reduce poverty does not end up in the government coffers but rather leaves the country.

The study was commissioned by the Interfaith Standing Committee on Economic Justice and Integrity of Creation (ISCJIC), comprising religious leaders from the Christian Council of Tanzania (CCT), Tanzania Episcopal Conference (TEC) and the Muslim Council of Tanzania (Bakwata).

Speaking at the launching ceremony in Dar es Salaam on Tuesday, ISCJIC Chair, Bishop Paulo Ruzoka, expressed concern that the money which could be used to improve the welfare of ordinary Tanzanians was being smuggled abroad. "It is high time incentives and tax waivers to investors were critically analyzed to establish who the major beneficiaries are," Bishop Ruzoka challenged.

The cleric also called for strict monitoring of revenues to enable the country to get rid of dependence on foreign aid. Presenting the findings of the report, Dr Honest Ngowi said that Tanzania's tax potential stands at 21 per cent of the gross domestic product (GDP) but collects only 16 per cent of it. Dr Ngowi was among three researchers who conducted the study.

"Incentives and exemptions were introduced in the 1990's to woe investors at the time when the country was transforming from state to private led economy and the investment climate was poor. "Now that the investment environment has improved we need to ask ourselves whether the waivers are still relevant.

And if so, how are these incentives benefiting small-scale investors like artisan miners?" the don queried. Dr Ngowi, also a lecturer of economics at Mzumbe University, proposed that incentives and tax waivers to investors should be based on productivity and potential to create jobs rather than applying the "one blanket fits all notion."

The don said the study found that only 1.5 million Tanzanians out of 15 million potential taxpayers, pay taxes. It was also revealed in the study that large and multinational companies were the major beneficiaries of tax waivers and incentives, whereas religious organizations accounted for just 0.05 per cent of all tax exemptions.

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