26 August 2014

Tanzania: TRA Meets Large Taxpayers On Excise Duty Changes

TANZANIA Revenue Authority (TRA) last week held a seminar with large tax payers, particularly banks and telecommunication companies to clarify some contentious issues regarding tax changes adopted recently by the Parliament.

One of the key issues that were to be put for discussion regards the New Finance Act 2014 that has introduced new changes including a ten per cent excise duty on charges or service fees levied by banks and telecommunication companies for money transfer services.

The new duty had replaced a 0.15 per cent excise duty on money transferred (exceeding 30,000/-) that was introduced in 2013. Excise duty on money transfers through banks, non-bank financial institutions and telecoms was introduced by amending section 125 of the Excise (Management and Tariff) Act Cap 147 - and became effective on July 1, 2013.

According to the TRA Commissioner General, Mr Rished Bade, voluntary compliance to tax obligations is a necessary step for meeting collection targets for financing development goals. Thus, awareness creation on adhering to tax regulations has been a continuous process.

"The seminar is thus an important opportunity for parties, the tax regulator and the large tax payers to discuss the cross-cutting issues on tax amendments adopted recently, in order to enhance tax compliance," said Mr Bade while officiating a one day seminar.

However, according to experts, the matter may require further review later this year prior to the introduction of the new VAT Act, anticipated to come into force in January, which amongst other things, will bring bank charges within the scope of VAT. With the amendment, mobile phones customers are no longer subjected to excise duty on money transfers through banks, non-bank financial institutions and telecommunications companies.

As customers are being exempted from the tax, the burden will be upon institutions and mobile money services agents, who will be subjected to 10 per cent excise duty on profits they generate from money transfers through the system.

The removal of the 0.15 per cent excise duty to customers on money transfers, according to the minister, intends to provide relief to people using handsets to transfer money through banks and telecommunication companies as well as improving their living standards.

Ms Mkuya said the charges have now been transferred to banks and their agents - who will be required to pay 10 per cent of the revenue and profits they generate from fees and taxes they collect from money transfer services.

For telecommunications, last year's increase of the excise rate to 17 per cent had effectively taken total taxes on turnover for the sector to an incredible 40 per cent once other taxes and regulatory levies are considered.

Also in the seminar, parties were expected to bring to the table the issue regarding the effectiveness of the Revenue Gateway System introduced by the TRA with the end goal of boosting collections at a minimum costs.

Known as revenue gateway, the tax collection system requires Tanzania taxpayers, who pay at least 5m/- tax and above at once, not to physically visit TRA offices; instead, they will be supposed to do so online.

In the meantime, Mr Bade invited banks and telecom firms' representatives to discuss the upcoming new VAT Bill that was tabled on June, this year but awaiting discussion in the Parliament in the next session in November, this year.

During the discussions in the Parliament, the minister proposed no changes to the current VAT Act 1997 which will soon be repealed and replaced by the new VAT Act which is anticipated to come into effect from January 2015.


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