Tanzania workers pay more tax than employers: report

Dar es Salaam. Managers, supervisors and junior employees are paying more taxes than what their employers are paying after selling their goods and services, a new report shows.

Apart from paying tax on their salaries in the form of pay-as-you-earn (Paye), employees also pay various consumption taxes when buying goods and services, including value added tax (VAT) and excise duty.

The 2016/17 Tax Statistics Report for Tanzania Mainland, which was published recently, by the National Bureau of Statistics (NBS) shows that the share of corporate tax (tax deducted from profits of companies) has also been shrinking.

The share of Paye to total direct tax was 44.5 per cent in 2016/17 compared with 28.3 per cent of corporate tax. Direct taxes collected during the 2016/17 financial year, according to the report, totalled Sh5.1 trillion, higher than the Sh4.8 trillion recorded in 2015/16, which was a growth of 5.4 per cent.

However, the rate of Paye for 2016/17 was lower than 46.2 per cent during 2015/16, while corporate tax also lower than 28.4 per cent recorded during the previous financial year.

During the year reported, employees’ tax collected was Sh2.27 trillion compared with Sh1.45 trillion paid by corporate entities in the form of corporate taxes.

The Tanzania Revenue Authority report has shown that corporation taxes reached peak in 2013/14 after accounting for 37.4 per cent of all direct taxes before starting to shrink in the following years. The shrinking of corporate tax was also caused by increased share of withholding taxes, whose share increased to 14.8 in 2016/17 from 14.5 recorded in 2015/16.

The report shows that withholding taxes totalled Sh760 billion in 2016/17 from Sh704 billion in 2015/16. Other improvements were recorded in individual tax which increased to 3.5 per cent from 2.9 per cent and gaming which increased to 0.5 per cent from 0.4 per cent.

Consumption taxes collected during the year under review amounted to Sh3.09 trillion of which VAT was Sh2.1 trillion or 69.7 per cent of all the indirect taxes. The remaining per cent in indirect taxes was domestic excise duty.

Valued Added Tax (VAT) is the amount payable on the supply of goods and services within Tanzania as well as goods and services imported into the country, which employees are paying.

Significant domestic goods and services that are charged VAT in Tanzania include beer, cigarettes, cement, electricity and telephony.

VAT on domestic services is charged on electricity, telephone, retail and wholesale businesses, transport, hotel and other services; on which every employee spends on a daily basis.

Meanwhile, revenue collected through international trade taxes grew by 5.4 per cent from Sh5.376 trillion in 2015/16 to Sh5.668 trillion in 2016/17.

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