TANZANIA: STAKEHOLDERS are calling for significant changes, primarily smart revenue collection, as the President’s Commission on Tax Reforms embarks on an ambitious review of the nation’s tax systems.
Their proposals include adopting a more efficient tax payment system aimed at improving revenue collection, reducing administrative burdens and creating a more attractive environment for business and investment.
Stakeholders have raised concerns about the current tax systems, stating that they are burdensome and hinder a thriving business environment by creating unnecessary obstacles that make it difficult for businesses to operate smoothly and efficiently.
They argue that the complexity, lack of transparency and frequent changes in tax regulations are causing significant challenges, particularly for small and medium-sized enterprises (SMEs).
The stakeholders which include business owners, industry groups and other relevant parties, pointed out that the cumbersome nature of the systems discourages investment, hampers growth and increases the cost of doing business. As a result, stakeholders have urged the government to reform and simplify the tax system.
They argue that such changes would streamline the collection process, create a more predictable business environment and improve compliance, leading to increased revenue. Specific proposals include a user-friendly approach that fosters transparency, reduces administrative burdens and enhances compliance rates.
Additionally, stakeholders have called for allocating space for street vendors, lowering import duties on buses, establishing tax systems for seafarers and providing more professional training for tax collectors, many of whom lack integrity.
Street vendors’ recommendations
Mr Steven Lusinde, ViceChairman of the Street Vendors Association of Tanzania said that the biggest challenge for street vendors in the country is the lack of designated spaces for doing business, which has essentially caused significant disruptions in their operations.
We have surrendered several areas for various projects, with the assurance that alternative spaces would be provided.
“However, to this day, we remain uncertain about our future, continuing to struggle without any concrete answers, despite various assurances from the government for better working conditions,” Mr Lusinde said.
He said, for instance the DDC area in Kariakoo was designated to create a design for stalls that could accommodate over 6,000 street vendors, which would significantly help reduce this challenge and increase revenue potential. However, he said; “No steps have been taken to implement this plan”.
Tanzania Business Owners Association’s (TABOA) recommendations
The TABOA’s Executive Secretary Mr Raymond Samson asked the government to lower buses import duty from the current 25 per cent to between 5.0 per cent and 10 per cent, with these payments being made in installments.
“By reducing these payments, it would increase the number of buses being imported, which would ultimately lead to higher tax collection,” he said.
He said that when a business owner imports buses, there are numerous upfront payments before the buses can even start operating. Furthermore, he proposed the introduction of a flat-rate tax, suggesting an annual payment of 1m/- for each bus.
Similarly, they proposed the creation of a single payment window for municipal and township bus terminals and stands under the President’s Office, Regional Administration and Local Government (PO-RALG), covering the entire route the bus travels.
“When renewing our bus licences, the tax would be included in the renewal fee. This would eliminate the inconvenience of buses having to pay fees at every station, saving time and reducing disruptions, as buses are currently forced to stop at each station even when no passengers are disembarking,” he said.
Dar es Salaam Seafarers Association recommendations
The Secretary of the Dar es Salaam Seafarers Association, Mr Frank Linkamba, said that the current system does not allow seafarers to pay taxes, resulting in significant revenue losses for the government. He said that approximately 80 per cent of seafarers work abroad and do not pay taxes because they are not recognised within the local tax systems.
“Some of our neighbouring countries have monitoring desks where seafarers can present their employment contracts and salaries so that tax deductions can be made. This would increase tax collection,” he said.
He was discontented with the government deduction of taxes from a teacher earning 600,000/-, but allows a seafarer earning 2,500 US dollars to go untaxed.
“The minimum salary for a seafarer is 400 US dollars. However, if they work abroad, they can earn between 1,500 and 2,000 US dollars, including seafarers with primary or secondary school education,” he added.
Additionally, for example in Zanzibar, all seafarers have a system in place to receive their salaries through the People’s Bank of Zanzibar (PBZ), enabling the government to collect foreign currency.
However, on the mainland, the government does not collect any revenue from seafarers, nor does it know how many Tanzanians are working abroad in this sector.
“A good tax system will encourage seafarers to pay willingly and the nation will benefit from foreign currency,” he said.
He also stated that with an improved tax system, even foreign workers from abroad would be turned away, as locals would be able to perform those jobs and the revenue would stay within the country, unlike foreign workers who take their earnings home.
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Tanzania Business Community recommendations
Mr Frederick Lutindi, a representative of the Tanzania Business Community and a trader at the Kariakoo International Market, discussed the significant challenges faced by businesspeople involved in clearing goods at the port.
He explained that the main issue is the lack of clarity in the relevant systems.
He said that taxes are set at two levels—high and low— which creates room for negotiations and corruption by unscrupulous officials.
“The government should ensure that all our taxes are set at a single rate, rather than having both high and low rates, which leads to negotiations that open door for corruption,” Mr Lutindi said.
He also pointed out another challenge, which is the service tax. Instead of having a single tax for all services, each service has its own tax, which results in multiple tax payments for a single transaction, burdening business owners with a lengthy list of taxes to pay.
He explained that the current tax rates are also unfriendly, ranging from 0.1 per cent to 0.3 per cent which creates opportunities for bribery and corrupt negotiations with unprincipled officials.
“The government should abolish this tax altogether because it hurts business owners since it is levied on gross sales, affecting a person’s capital. If the tax must remain, it should be incorporated into the business licence tax or set as a single flat-rate tax,” Mr Lutindi added.
Additionally, he highlighted another significant challenge faced by traders — the frequent confiscation of goods by task forces in Kariakoo and across the country. He emphasised that the nation relies on Kariakoo for its business operations and instability there has a ripple effect on the entire country.
Kariakoo Business Community recommendations
Mr Renatus Mlelwa, the Secretary-General of the Kariakoo Business Community, said that Kariakoo traders are significantly burdened by customs duties due to the cargo valuation system for goods coming into Kariakoo from the port.
He said that the valuation table used to calculate the actual value of cargo contains up to 72 items. “A Kariakoo trader seeking a container worth 400m/- must pay 80m/- in customs duties, which does not accurately reflect the cargo’s value, he said.
Additionally, the ViceChairman of the Kariakoo Market Traders Association Mr Mfaume Mfaume suggested that the government should make policy and legal reforms to attract businesspeople from East African countries to bring in more foreign currency.
Additionally, Mr Peter Marealle, the Vice-Chairman of Tanzania Chamber of Commerce Industry and Agriculture (TCCIA) in Dar es Salaam, advised the government on how it could ensure the proper collection of all taxes owed.
He pointed out that the current tax system using Tax Invoices is problematic because there are two types of invoices those for cash sales and those for credit sales which create confusion, especially around payments.
Mr Marealle questioned why the government demands payment within 20 days when there is no system in place to ensure those payments are made on time, especially when the business owner has already paid VAT to the government and is waiting to receive payment for goods.
He recommended that the government review the VAT system and differentiate between cash payers and those who pay via Tax Invoices, suggesting a different system for those who don’t receive refunds. He also argued that the government should ensure that VAT returns are submitted by those who have paid via Tax Invoices and if VAT is delayed, penalties should be applied to encourage timely tax payments.
“Think about a contractor who pays a high VAT and then starts receiving penalties within 18 days. Eventually, the profit they make is no longer profit because it is wiped out by penalties,” he explained.
He also discussed contracts, noting that many strategic agreements with the government are now initiated by foreign parties and that local businesses are being forced into agreements without specific contracts, leading to payment issues, and suggested that a law should require foreign investors to provide contracts when investing or doing business in the country.
“Right now, there are many tricks that foreign investors use to turn local businesses into creditors, like banks, which leads to financial crises because they don’t repay,” said Mr Marealle.
Tanzania Freight Forwarders Association (TAFFA) recommendations
TAFFA President Mr Edward Urio said the association acts as a tax collector on behalf of the Tanzania Revenue Authority (TRA), while some other customs collection responsibilities are handled by other institutions.
For instance, the 2016 Tanzania Shipping Agency Corporation (TASAC) Act allows the regulator to carry out certain customs duties, despite the government’s decision to remove a number of products previously under TASAC’s management.
He called on the government to reconsider the directive issued by the Ministry of Finance to the TRA, instructing Government Procurement Services Agencies (GPSA) to handle all government agencies and projects, such as customs clearance at airports, borders and ports.
“GPSA does not have the capacity to handle all of these businesses at once,” Mr Urio said.
In addition to the proposed tax reforms, stakeholders have called for practical solutions to address the challenges faced by businesses. This, they said, would streamline the tax collection process, reducing delays and disruptions, while ensuring that businesses can operate more efficiently
