Analysts: New tax stamp fees to boost collections

TANZANIA: ANALYSTS have said the new prices for tax stamps will yield positive impacts on collections and contribute significantly to the country’s economic growth.

The slashing of tax stamp fees follows a successful completion of negotiations between the Tanzania Revenue Authority (TRA), the Confederation of Tanzania Industries (CTI) and the vendor SICPA SA.

Through this new arrangement, the manufacturers will now pay less by between 15 and 30 percent depending on the sectors. Commenting, the Head of Research and Financial Analytics, Alpha Capital, Imani Muhingo said in Dar es Salaam on Wednesday that the move is expected to lower the cost of production leading to enhanced output value. He said the cost of electronic tax stamps has been an outcry from respective manufacturers for a while now it is a relief that the cost is alleviated.

A Dar es Salaam based Tax Analyst Mr Sinda Mwita said high tax stamp fees were eroding manufacturers profit and their ability to pay corporate tax and other taxes and fees payable to the government.

“Therefore, the reduction in tax stamp fees will lessen the tax burden for manufacturers, increase their profit margin and ultimately bolstering the companies’ ability to pay taxes to the government,” he said.

With this move, Mr Mwita said the prices of the products are likely to decline, increasing sales volume and the manufacturing companies’ revenues.

He added, “The reduction in prices for tax stamps is an opportunity for the manufacturing firms to expand and eventually stimulate economic development.” On his part, an economist-cum-investment banker, Dr Hildebrand Shayo said as initially intended, the fundamental idea behind tax stamps still stands, and in fact, the business case for their use has grown significantly as revenue authorities throughout the world have been able to capture significant excise money from the importation and production of excisable goods.

“In my view,” Dr Shayo said, “the stamps serve as a proof of payment as well as a deterrent to the sale of illegal goods in any unlawful form”. Therefore, after going through several rounds of procedures and making some large investments, the TRA adopted its tax stamp, effectively maintaining the ongoing use of tax stamps to maximise their advantages.

The government finances its expenses via tax. Both the official and informal sectors contribute to tax collections. In Tanzania, the informal sector accounts for a sizable portion of all employment.

“This indicates that if the focus could be directed into the informal sector, it may generate more tax income than the formal sector. Reducing the tax stamp fees will benefit two parties,” the economist said.

Manufacturers and importers will benefit, although the amount of tax that must be collected will be less than what the TRA estimates by its projections.

However, he said examining the reduction from a different perspective reveals that a significant improvement is on the horizon, one that will enable Tanzanian manufacturers to maintain a competitive edge in the EAC. TRA reports show that despite manufacturers’ claims that they were negatively affected, the ETS has achieved remarkable success in tax collection.

According to TRA data, since the service’s launch three years ago, about 500 enterprises have registered for ETS by the end of August 2022. The collections from these manufacturers have increased significantly over the last three years, from 1.6tri/- to 2.1tri/- in the three years following the ETS’s introduction.

The government through TRA is optimistic that the ETS systems have aided in safeguarding the government’s revenue by guaranteeing full utilisation of new technology in receiving realtime production data from the businesses.

The proposed reduction in fees will affect the amount of money collected, but it will also open up additional options to increase production, which will have a cascading effect that will lead to the creation of jobs.

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