Numerous taxes under scrutiny

Dar es Salaam. The government may consider the private sector proposal to consolidate regulatory charges as it works on the complaints by the business community that tax paying system was burdensome.

Industry, Trade and Investment minister Charles Mwijage says the government was aware of the problems affecting the local business environment and asked the traders to continue complying with taxation as they work on the challenges.

“We have heard the problems affecting Tanzania’s business environment and we expect to consolidate tax authorities,” Mr Mwijage told The Citizen on the sidelines of the launch of the African Economic Outlook.

However, he did not explain as to when this is expected to happen in the country.

“We know that they pay 49 different taxes and the best way to address the multiplicity of taxes is through consolidating the tax authorities. However, this cannot be done overnight. They are therefore required to comply with the current taxation as the government needs to collect it to deliver social services,” he adds.

His comment is a reaction to the recent reports which identified several factors that make it difficult for the businesses to run and grow with tax administration being the biggest problem.

Recently, Tanzania Private Sector Foundation (TPSF) with the support of BEST-Dialogue - a non-governmental organization advocating for improved business environment – published a survey called Business Leaders’ Perceptions of the Investment Climate which reveals the factors as tax administration; power; level of taxation; corruption; and access to finance.

Although the 2015 study identified corruption as the biggest impediment that the private sector thinks should be the priority for action, tax administration is the main factor that make business environment difficult.

The study was conducted during July and August 2015, according to TPSF.

Another study called Assessment of Levied Taxes on Tourism Sector in Zanzibar which was prepared for the Zanzibar Association of Tourism Investors (ZATI) under the sponsorship of BEST-Dialogue indicated that administrative burden is costing the Isles taxpayers Sh7.14 billion per year.

The study was conducted by consultants Deogratius Mahangila and Wineaster Anderson in 2015.

The World Bank also recently released its Doing Business 2017 report which indicated Tanzania ranking improved to 132 compared with 139 ranking previously.

However, the country dropped 8 places in tax paying indicator after making it more complicated by increasing the frequency of filing of the skills Development Levy and more costly by introducing a workers’ compensation tariff paid by employers.

According to the World Bank report, economies around the world have made paying taxes faster, easier and less costly for businesses—such as by consolidating payments and filings of taxes, offering electronic systems for filing and payment, establishing taxpayer service centers or allowing for more deductions and exemptions.

Many have also lowered tax rates and simplifying tax payment and reducing rates have seen tax revenue rise, it adds.

Private sector optimistic

The private sector is aware of the government intention but suspects the process may take too long to mature.

“The proposal to address multiplicity of taxes has been our demand and soon we will also be launching a programme under the World Bank which will identify the regulatory charges and the proposals,” says Mr Godfrey Simbeye, the TPSF executive director.

“However, since consolidating the regulatory taxes will involve the change of laws, it may take time,” he says.

Mr Simbeye explains that most of the issues were covered in the Big Results Now (BRN) initiative which included an aspect of reforming the business environment.

According to him, issues like corruption may take time to end but he believes a strong head of state may end it.

“The kind of corruption which the business community faces is mainly caused by bureaucracy. All in all, we see the true intention and determination from the current government to fight corruption,” he adds.

Tax administration burden was felt in different sectors including tourism, agriculture, manufacturing etc.

Recently, Zanzibar Association of Tourism Investors (Zati) chairman Mr Seif Miskry was quoted by the media as saying the industry stakeholders wanted the government to make it easier for them to comply.

Agriculture stakeholders also have similar concerns about tax administration.

“TPSF has proposed consolidation of the regulatory charges and the government will deal with distribution among its authorities. It just needs to be done carefully because it involves some legal changes,” says Salum Shamte, managing director of Katani Ltd which deals with sisal farming and processing.

“I think this is possible and very important. Agriculture is one of the sectors facing about 35 different taxes charged by both the central and local governments. Sometimes they are not very clear as one may come just out of the farm and meet a barrier where you will be charged in cash or in kind,” he says.