Tanzania hailed for curbing tax exemptions

A Norway-based institution has described the value added tax (VAT) Act of 2014, as a progressive fiscal legislation that is aimed at boosting collection of government revenue.

The institution, Chr Michelsen Institute (CMI) said the law is: “A move in the right direction since it restricts exemptions.” In its paper entitled: “Shaping the tax agenda: Public engagement, lobbying and tax reform in Tanzania” it stated that the law makes it harder for creation of new exemptions.

The paper released noted further that: “it will be harder to make new exemptions, as they have to be publicly debated. “The (Finance) Minister’s discretionary options are also more restricted”.

In 2015/16 budget speech, the Minister for Finance, Ms Saada Mkuya announced some new initiatives to reduce tax exemptions in the country.

The minister’s purpose is to reduce tax exemptions offered by discretion and instead cut tax on products with special importance for citizens and economy, thus minimising loopholes and corruption.

The study, prepared by three professors Odd-Helge Fjeldstad, Prosper Ngowi (pictured), Lise Rakne, worries: “yet, given the recent history of tax lobbying in Tanzania, it is likely that pressure will soon emerge to amend the Act to bring back exemptions”.

Business representatives interviewed as part of the study suggested that tax incentives are not of major importance for their decision to invest or not.

“They view improvements in the investment and business climate as a better way for Tanzania to boost growth and, thus, increase government revenue”, the study shows.

“To do so”, business people argue, “the government should improve efficiency and transparency in the public administration to reduce corruption”.

Instead of increasing tax exemptions, businesspeople are in favour of a simple and predictable tax regime. When asked what, then, explains the extensive lobbying for exemptions?

Business community said that tax incentives reduce business costs, and incentives granted to other companies and/or sectors in a non-transparent way, are perceived to be unfair. “When ‘everyone else’ is granted tax exemptions, one’s own competiveness depends on exemptions.”

The study shows that over time, tax lobbying in Tanzania has become better organised and coordinated through the larger business associations, sometimes under the umbrella of the Tanzania Private Sector Foundation (TPSF). TPSF represents both domestic and multinational companies.
Source: Daily News, reported from Dar es es Salaam, Tanzania
Share on Google Plus

About Abduel Elinaza

This is a short description in the author block about the author. You edit it by entering text in the "Biographical Info" field in the user admin panel.