Tanzania boosts tax collection with Digital Service Tax

DAR ES SALAAM: TANZANIA is making significant progress in the digital economy with the implementation of the Digital Service Tax (DST), which has notably boosted tax collection from digital services in the country.

Since its introduction in the Finance Act of 2022, the Digital Service Tax has driven significant growth in tax revenue from digital services. In the 2022/23 fiscal year, TRA collected 914m/- with revenue soaring to 20.49bn/- in 2023/24.

Between July last year and January this year, collections reached 20.06bn/-, highlighting a strengthened digital tax system.

This was revealed in a recent interview with TRA’s Digital Economy Section Manager, Mr Erick Mabula, about the progress of implementing the Digital Service Tax law in the country.

“The implementation of the law has been progressing step by step, with TRA actively utilising its specialised unit to monitor digital businesses,” he stated.

Mr Mabula further revealed that, as of January this year, a total of 138 non-resident taxpayers had registered under the Digital Service Tax system.

He stated that the authority is ensuring online business owners receive accurate tax information, register correctly and comply with their tax obligations as required by law.

“This is a positive step, demonstrating the effectiveness of the Digital Service Tax law. It also shows that Tanzania is fostering a favourable business environment for both local and international enterprises,” he said.

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Mr Mabula also acknowledged several challenges in enforcing the law, particularly in identifying and engaging with digital businesses.

“Many digital businesses do not have a physical presence in Tanzania, making it difficult to identify and communicate with them regarding their tax obligations. The process of recognition, registration and compliance is gradual,” he said.

Other challenges include a lack of clear interpretation of the law by some businesses, the complexity of analysing digital business models and the absence of international agreements on digital taxation.

He also noted complaints and opposition from some online businesses, particularly regarding the 2 per cent tax rate, which some argue is too high and burdensome.

To address these challenges, Mr Mabula said TRA has been actively educating businesses on the tax law and its benefits.

He also highlighted that TRA continues to collaborate with digital platforms, including social media and e-commerce sites, to ensure compliance.

“TRA has been informing non-resident digital businesses that Tanzanians using their services and making payments through their platforms must have a Taxpayer Identification Number (TIN) and participate in tax payments as required,” said Mr Mabula.

The Finance Act of 2022 introduced taxation on digital and electronic services in the country as part of the government’s efforts to generate revenue from the rapidly growing digital economy, driven by increased internet and smartphone usage.

The law established a 2 per cent DST on the total revenue earned by non-resident electronic service providers such as Meta, Google, Apple, Netflix and TikTok.

Additionally, a Value Added Tax (VAT) of 18 per cent is applied to payments made by Tanzanians for various digital services.

The taxable digital services include online advertising, electronic applications, digital content services and e-commerce transactions on various online platforms.