How effective e-system net 24tri/- tax collection

ECONOMIC analysts have commended the Tanzania Revenue Authority (TRA) for increasing efficiency by utilising electronic systems for tax collection, which resulted in an 8.2 per cent increase in revenue.

TRA collected 24.11tri/- in the 2022/2023 fiscal year, which is up by 8.2 per cent compared to the collections during the corresponding period last year.

The total amount collected is 97.4 per cent of the target, which was set at 24.76tri/-.

Speaking in separate interviews with the ‘Daily News’ on Tuesday, the analysts were of the view that the ability to collect and meet targets is a critical component of a country’s ability to finance social services like health and education, as well as critical infrastructure like roads and electricity.

An economist-cum-investment banker, Dr Hildebrand Shayo, said TRA has made it easier to pay tax by introducing measures such as an electronic tax filing system, something that will enable them to meet their revenue target this fiscal year.

“In this way, I do believe that technology is both improving efficiency and more importantly, reducing opportunities for corruption,” he said.

Dr Shayo further detailed that TRA will meet its target in this fiscal year because the government has been working to support and lower the minimum capital required to start a business, which in his view will in the long term generate more tax revenue.

The economist said that considering the vast needs of Tanzania, this envisioned target will put Tanzania’s economic development on the right track, meaning that over time, the government will be able to honour its obligations to public servants and pensioners.

In a separate interview, a researcher at the Centre for Banking and Financial Services Research (CBFSR) at the University of Dar es Salaam Business School, Godsaviour Christopher, said the upward trend in revenue collection highlights the increasing efficiency of TRA in utilising electronic systems for tax collection.

“Technology adoption has streamlined the tax payment process, making it more convenient and accessible for taxpayers. In addition, TRA’s efforts in educating and raising awareness among taxpayers about the importance of voluntary tax payments have contributed to positive results,” he stated.

Mr Christopher expressed great optimism, noting that the ongoing rise in revenue collection implies that TRA is making tremendous progress in boosting tax compliance and reducing tax evasion.

As a result, he said, the reliance on internally generated funds gradually increases, allowing more domestic revenue to be channelled towards financing development projects, a positive sign for the country’s economic growth and sustainability.

Furthermore, he said the concept of the Laffer Curve provides an exciting perspective on tax revenue collection. According to this economic theory, an optimal tax rate exists that maximises government revenue. Lowering tax rates can potentially incentivise more businesses to comply with tax regulations, leading to increased tax revenue overall.

He further said that in this regard, TRA could consider revisiting tax rates and thresholds. For example, adjusting the thresholds for Value Added Tax (VAT) registration from 100mil/- to 200m/- could encourage more businesses to register for VAT voluntarily.

“By doing so, businesses would not exceed the threshold and would be more willing to pay taxes. Careful consideration and analysis of the potential impact of such adjustments on tax revenues is necessary to ensure that the desired outcomes are achieved,” said Mr Christopher.

In the fiscal year 2021/22, TRA achieved 99.22 per cent of its target, collecting a total of 22.28tril/-. Building on this success, the authority set a higher target of 24.76tril/- for the fiscal year 2022/23 and managed to collect 97.2 per cent of the target, indicating an 8 per cent growth from the previous year.

Commenting on the same, the President of the Tanzania Association of Accountants (TAA), Godvictor Lyimo, said any increase in revenue collection was an important aspect of development.

“TRA recording a positive trend in revenue collection increases the government’s ability to fund development projects and reduces the level of dependency,” he noted.

According to Mr Lyimo, TRA’s several improvements have led to an increase in revenue collection. “If they continue on the same efficiency trend, they will be able to collect 100 per cent of the target, depending on a number of factors, including increasing collection efficiency, which means expanding the tax base.”

He said TRA needs to invest more in technology as various services are provided virtually, making it crucial to design a proper tax policy to bring these people into the tax net. It is also in tandem with widening the tax base.

“The other factor is that we also anticipate President Samia Suluhu Hassan’s opening of the economy to be sustained because it will help TRA achieve the target.” Mr Lyimo stated

Mr. Lyimo added that everyday tax education services should be offered and that people should be able to connect their tax payments to the growth of the nation.

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