The International Monetary Fund (IMF) Deputy Managing Director, Tao Zhang has hailed Tanzania for managing to boost tax collection to finance infrastructure development but cautioned the country needs a more stable tax regime to remain an attractive investment destination.
The visiting IMF leader said it was vital to mobilise more private and public resources by strengthening tax collection but unpredictability of tax regime remained a challenge as the country strive to develop an industrial economy as envisaged in the second Five-Year Development Plan.
"So it is crucial to mobilise more private and public resources within Tanzania, especially by strengthening tax collection under a fair and predictable tax regime. This is an area where Tanzania has fallen behind its neighbours," he said at a public lecture he gave in Dar es Salaam yesterday.
He described Tanzania as a strong performer in terms of economic growth and macroeconomic stability but argued the country needed to strengthen the role of private sector to sustain its impressive growth which has remained strong for over two decades.
He said the second Five-Year Development Plan would succeed if Tanzania would make optimal use of its comparative advantages, particularly the potential from agricultural and mining and possibilities of becoming a trading and logistic hub for East Africa.
Tanzania should also strengthen the business climate for local and foreign firms to attract investments, he said. The business community have been complaining of an unpredictable and complex taxation system which make doing business in Tanzania much harder and as a result discourage investment.
The government has restated its commitment to work on complaints from investors and business people of nuisance taxes ensure the country's tax system does not stifle the private sector.
Touring industrial exhibitions at Dar es Salaam International Trade Fair (DITF) grounds in December last year, the Minister for Finance and Planning, Dr Phillip Mpango had urged investors and the business community to forward to his ministry their tax recommendations so that they can be evaluated and incorporated into next year's financial budget plans.
And speaking at a meeting with members of the private sector under the Tanzania National Business Council (TNBC) at State House in Dar es Salaam early this month, President John Magufuli said his government was ready to work with the private sector which he described as the engine of the economy.
The meeting washeld in the wake of reports of weakening investor confidence due to concerns about the economy, policy unpredictability and tax crackdown targeting big companies.
Magufuli dispelled sentiments that his government was "anti-business," saying he was pro-business, but his administration would not tolerate tax dodging, which was rampant in Tanzania in previous years.