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Too many tax exemptions turn us into beggars

This particular morning my hands were literally empty and my head blank when I left the house last Monday and headed for the office and I feared my column might have nonsense.  I therefore had to nose about hard, scour the city painstakingly to chance a tidbit I may glean for my readers.

I had to have something worthwhile. Nevertheless, by some odd twist of fate I found myself in the office one Otieno Igogo, President of Tanzania Freight Forwarders Association (TFFA) based in Dar es Salaam by Samora Avenue.  At that time Mr Igogo had two visitors with him.

One of the two ladies had come for business, the other was her escort. My host waved me to a seat and took it, a distance away from him and kicked my heels all the while he attended to his lady visitor. From their talk, I gathered the lady was to get a loan or maybe, some financial assistance from her interlocutor - the TFFA president because, according to her explanation, she had a nascent organization.

Mr Igogo appeared to be well versed with formation of such associations known as non-governmental organizations (NGOs). The intricacies of their performance likewise, were nothing new to him. The TFFA president sounded to be a man sensitive to tax collection and highly averse to tax evasion and avoidance.

He must have found this occasion an ideal opportunity to lecture this prospective tax payer on the significance of paying tax. “People have come to me asking for funds to form an organization to provide a service to a community, but after they get the assistance, they pocket most of the money,” he told the woman. “That is not right. It is criminal because they are exempted from paying tax to assist the poor most of whom live in the rural.”

That reminded me of the vice of tax evasion the government has fought for long. Donor assistance fund is money of the taxpayer in another country. The cash and material assistance an NGO gets from local or an overseas donor is therefore supposed to go straight to an activity of community development.

“But it is the individual who runs the NGO, who benefits. We find it hard to fund such organizations without a proper and detailed project write-up,” Mr Igogo said. I was fired into action and went groping more into this evil of tax evasion. “The problem of tax avoidance and evasion is common in all tax systems….

While the evil practice cannot be eliminated it can only be minimized because it is planned and undertaken in secrecy by the taxpayer and sometimes with the cooperation of tax consultant and auditor,” one source says. What Reporter at Large has learn is that tax evasion is rife at the port of Dar es Salaam is missing so much revenue. The same source tells us what that tax evasion is a criminal offence and its consequences are grave indeed.

“A high degree of tax avoidance and evasion may result into serious Government revenue shortfalls leading into non-realization of government and economic and social development programmes, and bring inequality in the tax system that may necessitate higher tax rates to compensate for the revenue loss than what the rates would otherwise have been,” explains the source.  It is proper to know at this juncture what tax evasion and tax avoidance mean.

Tax avoidance is the practice and technique whereby one so arranges his business affairs such that he pays little or no tax at all but without contravention of the tax laws.  Tax evasion on the other hand involves a taxpayer’s deliberate contravention of the tax law(s) in order to minimize or eliminate tax liability altogether (pay no or little tax respectively by breaking the law).

Tax evasion is the application of fraudulent practices in order to minimize or eliminate tax liability. Government critics say the state official know all those who commit these crimes and abet them to get away Scott free. How much does Tanzania lose through the two vices annually? If the government loses revenue through taxation, it is unfortunate. If it does so willfully, it is unwise and criminal.

“A high degree of tax avoidance and evasion may result into serious Government revenue shortfalls leading into non-realization of government and economic and social development programmes,” the source adds. No wonder we have failed to even equip accordingly hospitals and schools.

According to the Tanzania Revenue Authority, the Government lost 587bn/- in tax exemptions made between July 2008 and April 2009.  That was willful loss of revenue! “In 2008 alone the government lost 1.8trl/- in tax exemptions,” adds the source.   Another critic says that if we can willfully give away so much ‘as charity money’, the so-called exemption, the nation does not need financial assistance whatsoever. I do not think it wise to differ with the person. Oh, how I loved my visit to Mr Igogo’s. It was well worth it.

THE month of September 2020 is on its ...

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Author: LAWI JOEL

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