Change of tune as Magufuli orders tax measures

President John Magufuli watches as Kilimanajro regional commissioner Anna Mgwhira signs to acknowledge receipt of identity cards for small and medium entrepreneurs in her region during the president’s meeting with Tanzania Revenue Authority, regional commissioners, regional administrative secretaries and small and medium-sized enterprises’ representatives in Dar es Salaam yesterday. PHOTO | STATE HOUSE

What you need to know:

  • President John Magufuli adopts an accommodative tone towards the business community as he criticises some of his top tax administration officials

Dar es Salaam. President John Magufuli yesterday issued a raft of new tax administration directives as he rallied his administration to raise revenue collection and expand the country’s tax base.

President Magufuli adopted a more accommodative tone towards the business community as he criticised some of his top tax administration officials for making it difficult for traders to pay tax.

He ordered the Tanzania Revenue Authority (TRA) to review tax rates and make them affordable, admitting to a cumbersome system to have Tanzanians become tax-compliant. “We can speak a lot about other areas but when it comes to tax collection, we are in a bad situation as a country due to high tax rates initiated,” Dr Magufuli said.

He spoke during a working session in Dar es Salaam that involved TRA officials and Regional Commissioners to discuss on improving tax collection and business environment. The meeting was attended by Finance minister Philip Mpango, BoT governor Prof Florens Luoga among other top bureaucrats.

The meeting came in the backdrop of concerns from the business community that many investments have recently closed over mounting debts and those in operation were struggling to make ends meet in a subdued trading environment.

Business associations have been complaining of isolation from the government and a harsh treatment by the tax man since the current government adopted a bullish approach to force tax-compliance. Non-payment of contractors and suppliers who are owed hundreds of billions of shillings as well as overly delayed VAT refunds are a source of conflict.

The minister for finance last year revealed some 200,000 businesses had closed shop over various reasons including not being able to meet tax requirements. Many firms have also retrenched workers to balance their account books.

While TRA says it has largely met or even surpassed its tax collection targets, the dire situation on the ground reflects a thinning space for both tax and non-tax revenue opportunities. TRA has since stopped issuing the traditional monthly collection announcement and neither does Bank of Tanzania publish them as us required.

It was apparent yesterday that President Magufuli’s stance was aimed at recouping apparent tax losses and narrow the widening gap between his administration and members of the business community. The Head of State berated TRA, Tanzania Ports Authority, Tanzania Railways Corporation and the police for being part of the problem that frustrated traders. He also was not happy with TRA’s progress in issuing unlicensed traders with IDs.

“Our business environment has not been encouraging of late. The process of getting licenses for trading has been scaring away investors in the country. Even if you have improved the monthly collection from 850 billion to 1.3 trillion in three years’ time, the business environment should be revisited and be improved,” said Dr Magufuli.

He questioned some conditions employed by TRA to collect taxes. “For instance property tax is too high that is why registered buildings are only 1,600,000 out of the nearly 50 million people we have,” he said.

He said property tax which is Sh10,000 and Sh20,000 for rural areas and at the district level respectively and Sh50,000 in urban areas should be reviewed.

“If we want to improve our revenue collection, we need to be wise when dealing with tax payers. You should not close somebody’s business because he or she has hesitated to pay taxes. Find a better way to accommodate this person for the country’s sake,” appealed the President.

In his presentation, TRA commissioner general Charles Kichere said the agency was working to create a seamless tax payment system to avoid duplicity and save time while raising its own operational efficiency.

Kichere said TRA, TPA and the Prime Minister’s Office are working to makes all departments in the port use a single payment system.

“Until the end of 2019, the one window payment system will be complete allowing all start-up companies to get both company names and Taxpayers Identification Number (TIN) number together and not separately as before.”

Dr Mpango emphasised the importance of local tax collection, noting that conditionality for foreign borrowing meant little funding would be expected from there. The meeting heard that due to tax disputes at the tax tribunal and appeals board, more than Sh24.1 trillion in funds was tied down. Kichere appealed for hastening of the cases.

In an effort to register petty traders, the President issued to RCs 67,000 special identification cards to be distributed as Sh20,000 each for a year. He said the cards were developed following slow progress of registering them using national IDs.

“After they get the ID cards, they should find better places to conduct their business to avoid being disturbed by different authorities, which also discharge their duties according to the law,” said Dr Magufuli.