Tanzania: Government Will Benefit the Most From Tax Reforms

The government's admission that the country needs tax reforms is a step in the right direction.

Its realisation that current tax measures are undermining the administration's main objectives, including tax collection efficiency and industrialisation, will add new impetus to tax reforms.

Although Tanzania's resolve to fund its mega projects using internal revenues bears good intentions, and has been admirable, it has also come with rather extreme measures.

We rarely hear of tax reliefs or other tax-related incentives for investors in crucial sectors. In fact, organisations that owe the government millions in taxes, dating back several years, have been asked to pay up or face immediate closure rather than being given a flexible schedule to clear their debts.

The rigidness with which the tax regulations have been implemented over the course of three years has seen tax dispute cases stack up at the courts. As a result, the disputes have tied down over Sh24 trillion belonging to the aggrieved investors in the form of court deposits.

Some of those who have been unable to deal with the Tanzania Revenue Authority (TRA)'s regulations have been forced to retrench a section of their employees to stay afloat. This has, in turn, cost the government revenues in the form of Pay As You Earn (PAYE).

As business stakeholders said, following President John Magufuli's speech this week on reforms in the tax policy by TRA, the private sector in the country needs government support. This includes helping manufacturers recover billions of shillings that they are owed by TRA in the form of Value Added Tax (VAT) refunds.

We also support the business stakeholders' appeal that they be involved in reviewing new tax policies. This creates a sense of ownership. Investors thrive in an environment of civility and goodwill and are put off by abrasiveness from tax officials. Without businesspeople there is no tax to talk about.

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