As MPs start debating the 2012/13 Budget today, a report on tax
incentives made available to some of the legislators here yesterday reinforced
their reasons to reject it.
Titled ‘Tax Competition in East Africa: Race to the Bottom,” the report
compiled by three NGOs shows that tax exemptions, which are given as inducement
to investors, do not serve that purpose effectively.
Debating the report, MPs wondered why the government extends so many
tax incentives and exemptions and then proceed to lament about little revenue
collections from its own sources.
“The Tanzania Revenue Authority has been
collecting a lot of money but the ministry says there is no money. Where does
all the money go?” asked Rachel Mashishanga, a Special Seats MP on Chadema
ticket.
Ms Christowaja Mtinda (Special
Seats – Chadema) asked fellow MPs to be categorical as they contribute to the
Budget debate in the Parliament starting today.
“It is also time we stopped listening to IMF and World Bank. These are
our major consultants in taxation matters and they pretend to tell us that we
should remove the incentives. But as we have seen in the report, incentives are
actually extended to foreign companies that hail from countries that control
the IMF and World Bank,” she said.
She said there was a need to enact a law that would push the government
to table investment contracts in the Parliament so that MPs could go through
them and expose the unnecessary tax exemptions and incentives.
Mr Ezekiel Wenje (Nyamagana – Chadema) said the East African countries
have been looking at tax incentives as the best way of luring investors because
of the region’s unfavourable conditions for doing business.
Mr David Kafulila (Kigoma South - NCCR-Mageuzi) asked Policy Forum to
make sure that well before the Budget session, it avails the presentations to
the Parliamentary Committee on Finance and Economy, which would carefully go
through the Budget before it is presented in the august House.
“The Finance and Economy Committee members have the opportunity and
powers to influence Budget changes… experience shows that it is very difficult
to push for major changes in the estimates at this stage,” said Mr Kafulila.
For her part, Ms Suzan Kiwanga, also a Special Seats lawmaker said the
solution was to sensitise villagers so that they say No to any projects in
their areas if an investor hasn’t paid taxes in full.
“There is no need to continue lamenting; let’s act and the best way is
to empower villagers so that they can reject all investments which are not
beneficial to them and the country,” said Ms Kiwanga amid cheers from other
MPs.
The report has been jointly compiled by Tax Justice Network Africa
(TJN-A), ActionAid International and Policy Forum.
The report shows that most incentives are being extended through
Tanzania Investment Centre (TIC), Exports Processing Zones (EPZ), Special
economic Zones (SEZ) and to mining investors.
An analysis done by the three organisations shows that major
beneficiaries of tax incentives and exemptions in Tanzania are a small group of
foreign investors.
“The losers are the general population, for the country doesn’t gain
much from the investments which enjoy the tax incentives and exemptions,” said
Dr Honest Ngowi when presenting the report to the MPs who are members of the
Africa Parliamentarians’ Network Against Corruption (APNAC).
Dr Ngowi, a renowned economist and lecturer at Mzumbe University, told
the lawmakers that studies conducted by the IMF focusing on East Africa have
concluded that investment incentives, commonly referred to as tax incentives,
were not an important factor in attracting foreign direct investment.
He noted for instance that Uganda, which offers less lucrative
incentives compared to this country, has continued to attract more foreign
direct investments than Tanzania, according to studies done by the IMF.
In his recent report, the Controller and Auditor general (CAG)
indicates that tax exemptions have been massively eating into government
revenues. Calculations made by the three NGOs show that revenue losses from all
tax exemptions and incentives reached 1.8tr/- in 2008 while in 2011/12
tax exemptions alone reached Sh1.016 trillion, being about 18 per cent of the
total tax collections.
“Due to the exemptions, the country is being deprived of the
badly-needed financial resources for financing public expenditure… these are
resources that could contribute substantially to reduce the number of the 36 per
cent Tanzanians who live below the poverty line,” reads part of the 32-page
report.
It adds that if spent on education and health, revenue lost through tax
incentives could improve their budgets by more than 20 and 30 per cent
respectively.
Dr Ngowi warned in his presentation that the increased competition
among EAC countries to provide tax holidays as attraction to FDI threatens
their efforts to collect revenue.
Speaking before the launch, APNAC chairperson from Tanzania Parliament,
Ms Mary Mwanjelwa (Special Seats - CCM), said the document has come at the
right time as MPs brace themselves for the Budget debate today.
“I am sure that this report will inform most of us and make our
contribution to the Budget debate more effective,” she said.
In its recommendations, the three organisations which compiled the
report ask the government to remove tax incentives granted purportedly to
attract FDI, especially in the mining sector.
They also ask the government to
conduct an independent study to evaluate the economic impact and volume of
foreign revenue that has been generated by EPZ and SEZ against incentives
extended by the government.
The government should also undertake a review of all tax incentives
with the aim of reducing or removing many of them, especially those which give
discretionary powers to ministers to offer exemptions, the report recommends.
Meanwhile, another report entitled ‘One Billion Dollar Question: How
can Tanzania Stop Losing so Much Revenue?’ launched last week in Dar es Salaam
said Tanzania loses up to Sh2.06 trillion ($1.29 billion) annually in tax
exemptions, illicit capital flight and tax evasion.
The report, launched by the Interfaith Standing Committee on Economic
Justice and Integrity of Creation (ISCJIC) said tax holidays and exemptions to
investors account for Sh458.6 billion, illicit capital flows account for 478bn/- while tax evasion accounts for another loss of Sh240 billion.
Source: The Citizen,http://www.thecitizen.co.tz, reported by Peter Nyanje in Dodoma.
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