Dar es Salaam. The government could be losing trillions of shillings each year in uncollected tax revenues due to shortfalls in the taxation system, a new study says.
However, the government said it is exploring a number of options in efforts to diversify its revenue sources. The Permanent Secretary in the Ministry of Finance and Planning, Mr Emmanuel Tutuba, said yesterday that the government was working to come up with new sources of revenues that would raise funds for development activities.
“It is a normal thing for a country like Tanzania and elsewhere to design new sources of revenues in order to move with a new business environment. Those who are saying the government should not look for other sources of income but to concentrate on corporate and incentives tax are not conversant with taxes and their sources,” he said.
A new study by ActionAid Tanzania says that, from the financial year 2013/14 to the current year, Tanzania could have lost up to $214.63 billion (about Sh500 trillion) due to what it termed weaknesses and inefficiencies within the tax administration system, harmful tax incentives, double taxation agreements and implementing development projects.
The study – titled How the Government is Losing Taxes: Need to Work on Closing Loopholes Leading to Losses in Tax Revenue – shows that, from potential resources stream, the government failed to collect $47 billion in taxes from informal economy in the past eight years. It also could not collect $50.2 million due to inefficiencies at the Local Government Authority level (LGA), while $133.8 million was unpaid tax arrears.
Another $156.9 billion was held up in unresolved tax appeals, while $10 billion was lost in illicit financial flows.
Other potential resources that the government could collect tax include $53.5 million in what ActionAid terms ‘harmful tax incentives’; $14.6 million inadequate tax compliance by public authorities, and $3.6 million failure by public authorities.
Presenting the study findings, a tax justice advisor at ActionAid Tanzania, Mr Balozi Morwa, said there were a number of areas that required adequate efforts to boost revenue collection.
He said collected tax was low due to weakness of revenue controls, tax evasion, tax incentive and international tax treaties.
“Any taxes that give the money to the government must be spent on public goods, provide investments that make the economy more productive and to end poverty to the community – and that any country that frequently introduces other means of taxes must have failed to maintain the current taxes,” he said.
In view of this, Mr Morwa urged the government to concentrate on management revenue especially in the informal sector and widen tax awareness to the public.
But, according to Mr Tutuba, the government was already looking at a number of other options, including ways of taxing new forms of businesses that may not have been there ten years ago – citing as an example online businesses that were not there several year ago.
According to him, corporate tax was just a small component that enabled the government to get tax from the registered companies, some applied to payee and incentive tax.
“The government’s doors are open to any organization, company or individual who has a new idea or proposal on how we can increase tax revenues, or seal gaps on revenue leakages. We will receive and review them before the next fiscal year,” he said.
The director of taxpayer services and education at the Tanzania Revenue Authority (TRA), Mr Richard Kayombo, said TRA is currently providing tax awareness lessons on a broad range in an effort to raise people’s understanding of the subject-matter.