THE title "heads to roll at Tanzania revenue authority" front-page, that Daily news, dated 17th December 2020, motivated my mind to think how an enabling environment for the private sector to
flourish in Tanzania hinges on government-business interface and trust, especially as crafty right tone, when matters related to paying taxes are concerned.Shuffling staffs within institutions and agencies and bodies and articulating stringent instructions and directives may be ineffective, if there isn't a firmed up trust, between government, understanding to those executing orders, on one side, and private sector on the other.
In Tanzania, governmentbusiness interface, if not well grasped and common goal determined and coordinated, it might be a tall order, for august agencies such as TRA to be able to meet targets as far as revenue collection is concerned, in relation to the size of the economy functioning.
In this regard, last week, at the formal working conversation, the Finance and Planning Minister, Dr Mpango, spicily, directed officers working at his Ministry of finance and any agencies under his docket, involved in revenue collection for the government, especially TRA, to come-up with better approach that would enable revenue collection to be improved, if conceivable to move from current TZS 1.5tri collection per month, to reach TZS 2.0tril per month.
Conferring to Dr Mpango's objective need to boost collection is to ensure all major current infrastructure projects under implementation, mainly strategic projects and other major projects in health sector, education, water and roads improvements in Tanzania and Isles, shouldn't be temporised, because voters want result, that can only be financed largely by revenue to be collected from internal sources that may include but not limited to the following. The most common ways of funding infrastructure are either via taxes or charges.
Taxes in my opinion to fund strategic infrastructure projects come out of government revenue. Significant amount of government revenue could come from income tax, National Insurance contributions and VAT. Likewise, users can pay for use of assets, or the goods these assets generate, through charges.
Utilities and related major projects are almost entirely funded this way. In other countries, charges have been used more frequently and in a wider variety of sectors, such as for roads in the Netherlands and Norway. A third option is to capture rents or windfall gains from infrastructure. This is in my view based on the theory that infrastructure investment brings with it economic value, most generally by increasing the value of the surrounding land.
Currently, landowners keep all the benefit of an increase in their property value. Channels such as a tax on the expected increase in property value rising from an infrastructure project can allow the public sector to access this value and use it to pay for infrastructure.
While insisting on efficiency at improving collections and devising suitable approach, Dr Mpango broadened his directives about elements of corruption and misconduct against principles of professionalism, things that could be clustered as unethical, comprising the use of abusive language when dealing with revenue collection to stop or close industrialists businesses, since such things stains TRA, the government resulting into businesses hating their own government for no reasons.
Outstandingly, Dr. Mpango, repetitively instructed, Commissioner General of TRA, that TRA staff who cannot cope with efficiency, being effective and above all being ethical while performing their roles, either to be degraded from their current positions or when worse comes to worse, to de removed from their job or assigned other duties, an exercise, Dr Mpango cautioned on the need to be meticulous and painstaking, taking into account justice of each and on each case involved.
In my view, Dr Mpango's wished-for expectation, especially on revenue collection to be increased to TZS 2tril per month, momentously hangs on the way government-business interactions and economic functioning in Tanzania is taken and babysitted. Without trust between the two, each side will reach a point of the mother in law faulty syndrome when the newly married couples enter into quarrels.
One of the most personal advantages of businesses interaction and trust in any economy is the boost in employment and other multiplier effects created thereafter. Employment levels, in my view inspire a range of other standard-of-living metrics, such as disposable income, home foreclosure rates and new small business start-ups and innovation.
Employing people across sectors thus can stimulate word-of-mouth advertising for a business or government as well, assuming the company and revenue collection infrastructure treats businesses well enough to get positive mentions, in an overall this cultivates a sense of compliances, which can enhance new investments, expansion of production of business and hence make it easier for businesses to prosper hence economy grow.
Amidst government structures and instructions and directives, government-business interactions can not only comply, but also pay a significant percentage of all taxes in Tanzania, including income tax, property tax, land tax and employment tax etc.
Having more, up and running businesses in the economy can encourage tax income for local governments, bringing in more money to invest in strategic national infrastructure projects and also for repair roads, develop schools and improve public services etc. That's why, in my view, given pushy target to raise revenue collection as itemised by Dr Mpango last week, there is a need to firm up the relationship between the government and businesses trust, truly, if as country want to see some development. Right approach to enhance revenue collection is vital, but critical is general government and businesses interaction and relationship and trust.
In Tanzania, the relationship between the government and business group has varied since independence. Though each government has had distinct relations with business and private sectors, the 5th phase government, under Dr JPM has generally, in my view, at the first five years, stimulated and enjoyed good rapport with the business community with simplified business environment structure, that if all requests from private sector are met and government trust private sector, Tanzania businesses will be like walking in the park.
To understand what constitutes effective governmentbusiness relations, and to assess how government-business relations are related to economic functioning, the structure of business relationship in Tanzania is determined by government institutions and bodies that are mostly managed by bureaucrats.
Such government institutions formulate and implement economic policies that regulated the activities of the private sector. Ownership, control and management of bodies and institutions determine the private sector in Tanzania.
Tanzania's private sector includes the large informal sector engaged in agriculture; commerce and traditional small scale processing and manufacturing, as well as all privately owned local and foreign business concerns that operate in the more regulated formal sector of the economy.
It must be noted that many private businesses, as well as state owned enterprises were not doing well. Business associations were therefore not very functional, members were not paying levies, and meetings were not regular accordingly or if held it was costly and some businesses, not all weren't paying taxes.
Much as the role of institutions is now receiving increasing attention in years under Dr JPM administration, there is more to ensure trust between the government and private sector firms up. It is from this firmed up trust, the institutional environment that forms the framework within which individuals, firms, and governments interact to would be able to generate sufficient income and wealth in the economy.
This is because institutional framework and trust has a strong demeanour on competitiveness and growth. Many economists hold the opinion that ruthless institutional environments and lack of trust especially between the governments set-up structure and desire of private sector, keeps returns to capital low and therefore holds back economic growth.
Could it be that Tanzania's growth expected to grow steadily at supersonic speed is being conceded by the quality of the institutional setting and wrong approach used? All things considered, an enabling environment for the private sector to flourish in Tanzania, and to be able to be a central point source of tax revenue to the government, hinges on government-business interface and effective relationship, coupled with trust, in my opinion, will remain fundamental in stimulating right businesses, investment, and economic growth.
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