- “The purpose of these amendments is to ensure there is a law compliance and access of information on beneficial owners,”
Dar es Salaam. Amendment of laws aimed at unmasking firms’ beneficial owners contained in the Finance Bill 2022 will harmonise systems of doing business and trade, increase transparency and create a conducive environment, some experts argue.
The Finance Bill 2022 passed by Parliament mid-week, amended the Business Names Registration Act Cap 213; the Companies Act Cap 212 and the Trustees’ Incorporation Act CAP 318.
“The purpose of these amendments is to ensure there is a law compliance and access of information on beneficial owners,” said Finance and Planning minister Mwigulu Nchemba when tabling the Finance Bill 2022.
Dr Nchemba said the amendments will set penalties to companies for failure to comply with the improved legal requirements.
Furthermore, he said the penalties will also be extended to companies that have failed to put an index of names of members and beneficial owners as well as failure to submit the company’s annual returns.
Also, they put the responsibility of maintaining documents of account records related to bankruptcy to the company’s insolvency team.
“The amendments also aim at enabling a trustee to provide reports on changes of trustee members or beneficial owners or appointment of a new trustee by the trustee of inheritance. The law also issues a penalty to a trustee who fails to provide the required information,” he said.
But, experts told The Citizen that the move will smoothen business operations, increase trust and accountability in the management of companies.
Prof Haji Semboja of the Economics Department at the State University of Zanzibar (Suza) said, “I don’t see the amendments as a punishment tool, rather as an instrument that will smoothen trade operations.”
“It is only an old-fashioned mind that may think laws and regulations have been enacted to enforce supremacy. But, let us see the development as something that will add value to the private sector, by providing a safe and stable operations environment,” he added.
According to him, the amendments will increase trust and accountability in the management of companies.
The amended Finance Act that became effective from July 1, 2022 seeks to harmonise the definition of a ‘beneficial owner’ with the one provided in the Anti-Money Laundering Act, chapter 424 (AML Act).
“The law provides the condition to submit information of beneficial owners during registration of businesses run under partnerships and unveil people or institutions that can access information of beneficial owners,” reads the Finance Act in part.
Furthermore, the document imposes a penalty for failure to provide information related to beneficial owners.
The law requires people who actually own, control a company or those forming the company to be known, something that will be helpful in combating corruption, crime and and terror incidents instead of facilitation under anonymity.
The goal is to limit the use of shell companies to hide the actual individuals owning or controlling activities that may be criminal or tax evasion, although the information is not intended to be shared with the public, rather than the government agencies, law enforcement agents, financial institutions, and regulators.
But, Repoa executive director Donald Mmari said effectively and efficiently executing the move is beneficial to the country as it will widen the tax base. He said Tanzania is not the first country to impose such legislation, adding that even developed countries like the US have passed similar legislations that are well known to investors.
“These are not things that will scare investment, because investors are only interested in understanding the costs of doing business,” he said.
He said the amendments will be helpful in detection and prevention of corruption and money laundering which are important pillars of development.
According to him, the amendment will promote transparency and disclosure of important information in different areas related to revenues, contractual engagements and interested individuals in the said companies.
The Breakthrough Attorneys in its online review says one of the adopted mechanisms aimed at curbing and keeping tag on corruption and money laundering is to demand release of beneficial ownership reports.
Through the report persons termed as beneficial owners who are behind the companies that have been registered in the country will be unmasked.
“It was crucial for the concept to be fully implemented in the country to cater for several purposes which include corruption prevention and exposure, money laundering, illicit financial flows and acts of such nature,” reads part of the document.
The imposition of the concept shall ease conduction of due diligence to uncover persons linked to businesses established in the country, their source of income and trace their business activities.
The concept will also increase trust and accountability in the management of entities registered in Tanzania by keeping a tag on matters such as tax evasion, revenue collection enhancement, and overall improvement of the Tanzanian investment climate.