Tanzania Daily News (Dar es Salaam)

18 June 2012

Tanzania: Good Infrastructure to Boost Taxes - MPs

Dodoma — TANZANIA will continue to lose revenues through tax incentives unless the government invests heavily in the improvement of the country's infrastructure to create conducive business environment.

Members of Parliament said here on Sunday that tax incentives to local and foreign investors were inevitable under the current situation, which they described as unfriendly to business.

They were debating a report by Policy Forum on tax incentives and revenue losses in Tanzania, which shows that the country losses tax revenues amounting to six per cent of Gross Domestic Product, with beneficiaries being a small group of foreign investors.

"I can hardly see an alternative to tax incentives due to our harsh business environment...poor and bureaucratic services, erratic power supply and poor roads are big disincentives to investors," charged Mr Ezekia Wenje (Nyamagana -Chadema).

He argued that the alternative was to put in place smooth and friendly business environment that would easily attract investors into the country without necessarily seducing them through tax holidays, that deny the government massive tax revenues.

Another legislator, Ms Sabreena Sungura (Special Seats - Chadema), cited Kigoma, saying although the region has developed a Special Economic Zone (SEZ, investors would hardly invest. "Poor infrastructure is the root cause of excessive tax incentives to investors...which investor would invest in Kigoma, for instance, where there is no any reliable means of transport," queried Ms Sungura.

She, however, decried the system under which incentives were provided, saying the system itself was providing loopholes for corruption. The lawmaker faulted the system of entrusting the minister with the sensitive responsibility of awarding incentives to applicants.

The MPs decried massive tax evasion on top of incentives, charging that the country has great potentials of collecting high taxes and running its affairs independently. Dr Titus Kamani (Busega - CCM) said multiple taxes were discouraging tax compliance.

Presenting a report, Dr Ernest Ngowi said tax incentives narrow the tax base, citing the 2008 annual report by Tanzania Revenue Authority (TRA) that showed only 39 large taxpayers contributed about 80 per cent of the country's tax revenues.

The revenue collection agency further claims that out of 15 million potential taxpayers, only 1.6 million pay taxes. The informal sector that accounts for between 40 and 60 per cent of GDP and about 70 per cent of the country's workforce goes virtually untaxed.

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