This is how OTR’s non-tax revenue can reach 10pc

TANZANIA: IN August of this year, President Dr Samia Suluhu Hassan expressed her ambition for non-tax revenue from Public and Statutory Corporations (PSCs) and minority interest corporations to account for 10 per cent of domestic revenue within the next five years.

Currently, the contribution of non-tax revenue collected by the Office of Treasury Registrar (OTR) stands at just 3 per cent. Analysts are now weighing in with constructive suggestions on how to scale up this contribution.

Economists who spoke to the OTR recently emphasised that there are no quick fixes to significantly boost non-tax revenue; instead, broadening the non-tax revenue base is essential.

Dividends have been the largest contributor to non-tax revenue, commanding an average of over 47 per cent over the past nine years. This is followed by contributions to the Consolidated Fund, surpluses and other remittances, interest and loan repayments and remittances from the Telecommunication Transfer Monitoring System.

An economist from the University of Dar es Salaam, Professor Abel Kinyondo said there is a significant need for the government to expand the revenue base to achieve fair revenue distribution.

“We can broaden the non-tax revenue base by expanding the formal economy,” he underscored.

He added that the formal economy is currently very small and the government should continue to create a conducive business environment that encourages those in the informal sector to transition into the formal sector.

Since assuming office in March 2021, the sixth-phase administration under Dr Samia has been actively pursuing this goal and her pro-business approach has yielded positive results.

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Recent data shows a 53 per cent increase in the value of registered projects, according to the 2023 National Investment Report released in mid-September.

Last year, registered projects were valued at 8.658 billion US dollars, compared to 5.658 billion US dollars in 2022, with the number of registered projects growing by 15.2 per cent to 9,678.

An economist from Mzumbe University, Dr Daudi Ndaki suggested that the government should continue to enhance the business climate to attract more participants in the formal sector.

He advised that experts be fully engaged to strategise on maximising revenue collection without negatively impacting citizens.

Additionally, he said, these experts could help innovate new sources of non-tax revenue, increasing potential without overburdening a few individuals.

This vision aligns with President Dr Samia’s emphasis on creating a friendly tax administration to attract both local and foreign investors.

The Head of State is on records as saying, “We need a friendly tax administration to attract both local and foreign investors. We need businesses to thrive so that people are rewarded for their successes.”

Dr Ndaki also recommended that a significant portion of State-Owned Enterprises’ (SOEs) revenue be reinvested into their core activities to enhance efficiency and revenue generation. This strategy, he explained, would ultimately boost OTR’s non-tax revenue.

Understanding the relationship between the global economy and a nation’s well-being is crucial. Economic growth is vital for development, yet the importance of non-tax revenue is often overlooked, preventing countries from fully leveraging this resource.

In this context, Treasury Registrar (TR) Mr Nehemiah Mchechu has committed to enhancing the performance of public entities to increase revenue generation and their contributions to the government’s coffers.

“We are dedicated to improving the efficiency of State-Owned Enterprises through better oversight,” he stated, expressing optimism that this will elevate public entities. During a workshop on a 25-year strategic plan, Mr Mchechu said his office needs more non-tax revenue from productive activities rather than penalties and fines.
“We must ensure the effective and sustainable contribution of public entities to national development by focusing on operational excellence and commercial viability,” he asserted.

He further noted that reliance on penalties and fines is detrimental to the economy, stressing the need for strategies that broaden sources of healthy non-tax revenue.

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“Penalties and fines are not healthy to our economy. We need to come up with strategies that will broaden our sources of healthy non-tax revenue,” he said.

Head of the Finance Department at the University of Dar es Salaam Business School, Dr Tobias Swai advised that public entities should invest in sectors that cater to a large portion of the Tanzanian population.

He cited the financial sector, insurance, real estate, tourism, transportation and agriculture as key areas for investment, cautioning that such efforts should be matched by efficiency in service delivery.

“It is high time the government improved the State-Owned Entities to seize available opportunities,” he stated. “We need strong leadership systems and transparency in employment for commercially oriented entities.”
This article is prepared by the Office of Treasury Registrar.