Now Tanzania to review tax waivers

By JOSEPH MWAMUNYANGE Special Correspondent
 

 

In Summary

• Among measures aimed at cutting tax exemptions is the abolition of VAT on tourist services.

• Africa likely to lose in G8 ‘tax haven’ deal

Tanzania has laid down a raft of measures to cut tax exemptions, which have been rising steadily in recent years.

In his 2013/2014 budget speech, Finance and Economic Affairs Minister William Mgimwa told parliament that among measures aimed at cutting tax exemptions is the abolition of VAT on tourist services.

“The Tanzania Investment Act will also be reviewed with a view of retaining only a few tax exemptions that will stimulate strategic investments,” said Mr Mgimwa.

The Tanzania Revenue Authority Commissioner-General Harry Kitilya said tax exemptions were currently equivalent to about 2.9 per cent of the country’s GDP.

The tax waivers rose to Tsh680.7 billion ($436,325,600) in the 2009/2010 financial year from Tsh335.6 billion ($215,162,800) the previous year, and Tsh1,016 billion ($651.5 million) in the 2010/2011 financial year.

Major beneficiaries include the mining sector and religious institutions, with the former receiving Tsh110 billion ($70.4 million) in the 2010/2011 financial year up from Tsh48.7 billion ($31.2 million) the previous year.

Waivers to religious institutions rose from Tsh281 million ($180,256) in the 2010/2011 financial year to Tsh1.6 billion ($1 million) last year.

Bubelwa Kaizar, the executive director of Concern for Development Initiatives in Africa (Fordia), a not-for- profit organisation, said that although the exemptions are meant to attract investors, supervision is lacking.

“Most of those enjoying exemptions are investors operating under the Tanzania Investment Centre, which issues certificates on the assumption that once investors are attracted, the government will collect more taxes.

"However, this isn’t happening as beneficiary companies end up evading taxes,” said Mr Kaiza.

According to Mr Kaiza, such companies don’t pay corporate tax but receive exemptions on fuel and incentives on their capital expenditure.