No loss of revenue when companies change names-Minister

DODOMA: MINISTER for Finance Dr Mwigulu Nchemba has informed the House that the government does not incur any loss when a company changes its name in the country.

However, he said, if the change in the company’s name involves the sale of shares, such context will necessitate the payment of a capital gain tax to the government.

According to TRA, a person who owns an interest in land or building shall be treated as realising the asset when the person parts with ownership of such interest including when it is sold, exchanged, transferred, distributed, canceled, redeemed, destroyed or surrendered and in the case of interest of an entity when it ceases to exist, immediately before the entity ceases to exist.

The Income Tax Act requires a person, who derives a gain from the realisation of an interest in land or buildings situated in the United Republic, to pay income tax by way of single instalment.

The minister gave the explanation when responding to the question posed by Michael Kembaki (CCM- Tarime Urban). The MP sought an answer from the government on measures it is instituting to deal with foreign companies that have been changing names every after a certain period of operation.

The MP was of the view that some foreign firms have been changing names every after a certain period of time for the purpose of evading tax.

 Responding to the question, Dr Nchemba said having learned of the tax evasion strategy by some foreign companies that operate in the country, the government came up with explicit measures to deal with the malpractice.

According to the minister, one of the measures instituted is the effective enforcement of the Companies Act, Act No. 12 of 202, Cap. 212 that requires investors to furnish the Business Registrations and Licensing Agency (BRELA) with information about their intention to change their companies’ names.

The minister said the government has been keeping record of the  respective companies’ history to avoid using new names to evade tax or to engage in unlawful activities.

The minister said another measure is the effective enforcement of the Tax Administration Act Cap. 438 R.E 201. Through the Act, the Tanzania Revenue Authority (TRA) is required to maintain the Taxpayer Identification Number (TIN) of a respective company even when it changes the name.

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The minister insisted that, through TIN number, the government has been tracking the company’s tax payment history. “In this case, the change of a company’s name does not absolve the firm from tax payment obligation. The government closely monitors these events.”

After Tanzania started implementing its privatization through the Presidential Parastatal Sector Reform Commission (PSRC) in 1990s, some investors who rushed to exploit the opportunity started changing companies’ names after operating for some time.

 PSRC played a key role of coordinating implementation of the government’s economic reform efforts in the form of privatisation.

Hotel and hospitality industry and telecommunication sectors are the two areas that witnessed their investors changing the companies’ names, causing public uproar, especially from some politicians, on the possibility of exploiting the opportunity to evade tax.