The cost of ignorance: Why understanding taxes matters

DAR ES SALAAM: WHILE sitting in my office one recent morning, I watched two residents of Dar es Salaam city being interviewed by a local television station, claiming that they did not know what the taxes collected by the Tanzania Revenue Authority (TRA) are used for or where the fund goes.

One of the interviewees went further, said she did not understand the duty carried out by TRA and called on the Authority to educate the public about its responsibilities and how taxes are collected.

These residents of Dar es Salaam city need to understand that the improved appearance of the city today as well as that of other cities such as Arusha, Mwanza and Mbeya, the upgrading of roads to tarmac standard, installation of street lighting and enhancement of various services including access to clean and safe water, construction of health facilities and others, are all results of efficient government revenue collection.

Social services delivered in Dar es Salaam city and other regions clearly demonstrate that the funds collected are returned to citizens through the implementation of various development projects.

It should be understood that government revenues in the country are collected by the Tanzania Revenue Authority (TRA), which was officially established under Act No. 11 of 1995 for revenue collection. TRA is the legally mandated institution responsible for assessing, collecting and accounting for all government taxes on behalf of the state.

To fulfill this crucial role in national development, TRA, on behalf of the government, forms a partnership with taxpayers, whereby taxes are collected in accordance with the law. In other words, TRA is the main collector of government revenue, which is used to finance the provision of health services, free education, access to clean and safe water and infrastructure development.

These taxes ensure that the government is able to build irrigation systems for agriculture, improve extension services and strengthen national security.

Moreover, major projects that have been completed and those currently underway such as the construction of the Stiegler’s Gorge hydropower dam, the standard gauge railway, the purchase of aircraft, procurement of medicines and many others are all outcomes of revenue collected by TRA.

In this context, when individuals, organisations, companies, institutions and foreign firms operating in the country evade paying taxes, they hinder the implementation of critical development projects essential for national progress.

ALSO READ: Beyond Hospitals: Why insurance is becoming key to healthcare in Tanzania

Therefore, in light of the concerns raised by the Dar es Salaam residents and likely shared by others in different regions, TRA should continue providing public education about its responsibilities and the importance of taxes in enabling development activities and government functions.

Secondly, TRA must continue strengthening itself and ensure that the tax collection environment in the country is taxpayerfriendly, enabling timely and hassle-free compliance so that taxpayers do not perceive tax payment as a burden but rather as a civic duty.

Citizens should also recognise that, due to the importance of taxation, the government under President Samia Suluhu Hassan recently announced a comprehensive overhaul of the tax collection system.

President Samia made the announcement in Dar es Salaam city while receiving the report of the Presidential Commission on the Evaluation of Tax System Reforms.

The commission, which was chaired by retired Chief Secretary Mr Ombeni Sefue, presented 284 recommendations for improving the tax system, grouped into six categories.

Mr Sefue noted that 146 recommendations relate to policy and legislation, 41 to Information and Communication Technology (ICT), 30 to administration, 25 to efficiency, 14 to tax dispute resolution and 13 to tax administration structure and systems.

He explained that the commission identified several persistent concerns among taxpayers, particularly regarding inequities in tax payment.

He pointed out the overlap of regulatory authorities, such as TRA and local government authorities, which often target the same business sources with uncoordinated levies, fees and charges, leading to increased costs and operational burdens for businesses.

He said the commission also identified high tax rates and the introduction of new levies and fees without alignment to broader national objectives.

“Taxpayers have lost confidence in the existing tax dispute resolution mechanisms, as stakeholders perceive them to lack structural and operational independence. As a result, taxpayers feel they are not treated fairly when raising complaints against TRA,” he explained.

He said the commission found that there is no comprehensive and inclusive system for identifying, nurturing and supporting small and start-up entrepreneurs, an issue that remains a major concern, especially among youth.

He emphasised that this group needs support, education on the importance of paying taxes and access to business capital so they can transition into the formal tax system.

While commending the commission for its work, President Samia noted that the report was submitted at an appropriate time, as the world is undergoing significant technological, economic and political changes, including shifting global production trends closer to markets.

She stated and here I quoted her, “The report has been completed and submitted at a time when our country is beginning to implement Vision 2050, where our goal is to grow the economy to one trillion US dollars by 2050,” end of quote.

The benefits of taxation in any nation are well understood. Therefore, TRA, as the legally mandated body responsible for assessing, collecting and accounting for all government revenue, must continue to educate citizens on the importance of paying taxes for national development and the well-being of its people.