21 May 2014

Tanzania: Aggressive Efforts Needed to Plug Revenue Leakage

Photo: http://www.flickr.com/photos/martijnmunneke/
Dar es Salaam, Tanzania

TANZANIA may soon join global tax treaties to curb huge losses of government revenue caused by misinvoicing of the country's exports and imports. The Revenue Authority Director General, Mr Rished Bade, told a forum in Dar es Salaam on Monday that the country was among those losing revenue in trillions of shillings due to illicit trade transactions.

Experts say loss of revenue by under-invoicing or over-invoicing might be just a tip of the iceberg, as it is feared that a lot of transactions escape the taxman's net. According to a report by the Global Financial Integrity (GFI) entitled 'Hiding in Plain Sight' Tanzania was robbed of around a staggering (18 billion US dollars) 29.3tri/- in revenue between 2002 and 2011.

This amount is terribly worrisome to say the least because it represents a huge chuck of the country's annual gross domestic product (GDP) currently estimated at 50tri/-.

Mr Bade, who was recently appointed TRA Director General, admitted on Monday that East African countries were among places facing the challenges of fraudulent trade transactions.

He said the culprits were many including rich multinationals and there are some earlier studies showing that misinvoicing had been going on for many decades. It is hoped that TRA and other relevant authorities are going to ensure Tanzania joins the global taxation system as soon as possible to curb further bleeding of the country's revenue.

TRA should also strengthen revenue collection measures and combat cheating to enhance self-reliance. This will make the country do away with the present shameful over-dependence on foreign donors and the so-called development partners.

The laws must be reviewed to introduce deterrent penalties against culprits such as long-term imprisonment and immediate revocation of trade licences. The government should also continue discouraging unproductive tax exemptions as well as fiscal policies that are counterproductive and negate people's welfare, especially smallholder farmers and small and medium enterprises.

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