Experts flag internet, systems as key to tax reforms

DAR ES SALAAM: ANALYSTS have described the newly released Presidential Commission on Tax Reforms report as pro-revenue and progrowth.

They cited its strong focus on digitalising tax collection and formalising informal businesses as key steps toward boosting voluntary compliance and expanding the country’s tax base.

However, experts are urging the government to improve internet access and affordability in both urban and rural areas, and to ensure the proposed digital systems are robust enough to serve all taxpayers smoothly and simultaneously.

Among others, the commission led by former Chief Secretary, Ambassador Ombeni Sefue (Pictured) suggested development of a mobile application by the Tanzania Revenue Authority (TRA) that will enable taxpayers to register, file returns, check tax liabilities and make payments digitally.

Speaking to the Daily News in the wake of the report’s presentation, Economist and Investment Banker, Dr Hildebrand Shayo described the report as the pivotal moment for the national tax system beyond shifting into a cashless economy to enhancing fiscal transparency, formalise economic activity and broaden the tax base “Promoting digital transactions offers an opportunity to create verifiable financial records, reduce income underreporting and bring millions of micro-enterprises into the formal tax system,” Dr Shayo said.

Adding “electronic payment platforms make it easier to collect real-time data on sales turnover and business activity, which complicates the process of firms hiding income or operating outside regulatory oversight,”

He said the digitalisation could significantly transform the fiscal landscape in the country where many transactions are still conducted in cash, especially in informal urban areas and rural markets.

Dr Shayo said based on the research study he conducted on a few selected firms two years ago, Tanzania could raise its tax-toGDP ratio by between 2.0 per cent and 3.0 per cent points over the medium term if digital compliance mechanisms are effectively implemented.

He said the basis for such projection is the comparative experiences of emerging economies that have adopted electronic invoicing, digital Value Added Tax (VAT) systems and mobile payment integration.

Regarding formalising the informal sector, Dr Shayo said the initiative could be the most significant impact of encouraging a cashless economy, noting that “Administrative complexity, limited awareness and lack of access to finance are the main reasons why millions of small businesses operate outside the tax system, rather than intentionally evading it,” he said.

Furthermore, he said promoting digital transactions also constitutes a governance reform by mitigation challenges associated with cash-based systems including corruption and unrecorded payments.

“Digital payment ecosystems create audit trails, which improve accountability. Monitoring government procurement, tax payments and social transfer programmes can be more efficient, thereby decreasing the risk of public funds being misused,” he said.

Economic and Financial Analyst, Mr Kelvin Msangi appreciated the report saying its recommendations are not shallow.

“They appear broad, structured, and in several areas quite thoughtful. The direction of the recommendations suggests a real effort to look beyond collection alone and toward the wider economy,” he said.

Mr Msangi said the proposals on reducing overlapping levies, easing the burden on young businesses, improving tax dispute resolution, digitising administration, limiting unnecessary face-to-face contact between taxpayers and tax officials, and building a stronger ecosystem to identify finance entrepreneurs all point to a deeper attempt to rethink how the tax system works in practice.

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He said the recommendation to reduce direct face-to-face interaction between tax officers and taxpayers go beyond curbing corruption in tax collection to making the country’s economy more predictable.

“A more digital, rules-based, transparent system lowers that hidden premium. It makes compliance more predictable and predictability is one of the most valuable assets any economy can offer,” Mr Msangi said.

Meanwhile, Tax Consultant and Researcher, Mr Sinda Mwita urged the government to upgrade the TRA’s tax collection systems including server to ensure that it offers service to all taxpayers instantly so as to end incidents delayed loading and frequent failure to access the platform which discourage clients.

He said the reforms should also consider consolidating internet effectiveness in all areas across the country in effort of fostering tax compliance inclusion.

Mr Mwita who founded the Sinda Tax Service, a tax consultancy firm said it also imperative to easy internet cost in expanding affordability to the envisioned digital tax payment platform.

He said digital tax payment will address overcharging challenges to small sized businesses by replacing presumptive tax which is based on estimations with the electronic system that assess petty traders digitally.

Conversely, he said the digitalisation of tax comes with challenges to multinational companies encompassing oil firms which their assessments entail price transfer alerting that there is possibility of false profit reporting.

In that regard, Mr Mwita urged the government to devise the digital application that will ensure transparency of the multinational corporations to allow fair and accurate taxation.

On formalizing businesses in the informal sector, he urged the government to modify the business registration card introduced during Dr John Magufuli’s presidency by replacing them with digital number which will be integrated in digital application to ensure traceability and monitoring.

He called on the government to facilitate business and trade development as many as possible through sound interventions such as clemency to those who fail to pay taxes while depicting genuine commitment to growth.

“It not only about meeting revenue collection targets but growing businesses,” Mr Mwita said.

Above all, he said education to taxpayers, enhanced customer care and effective uses of the revenue collected are vital to build lasting peace and confidence to businesspersons and investors.

He said education on tax payment should be provided by tax pundits with deeper understanding to the tax eco-system in Tanzania.

The Commission which was established in October 2024 presented its findings to President Dr Samia Suluhu Hassan at State House in Dar es Salaam on Monday, March 18.