The findings of a recent study by ActionAid Tanzania that the country could be losing trillions of shillings in government tax revenues each and every succeeding financial year needs to be taken most seriously.
Reportedly, the study concluded that Tanzania may have lost the equivalent of billions of dollars – translating into trillions of shillings – in tax revenues during the eight-year period from the 2013/14 financial year to 2020/21.
This, the organisation says, was the result of what it describes as “weaknesses and inefficiencies within the tax administration system; harmful tax incentives; double taxation agreements and in implementing development projects”.
For example, the study found that the government failed to collect $47 billion in tax revenues in the last eight financial years from potential taxable resources in the informal economy; $50.2 million as a result of “inefficiencies” at the local government authorities level and $133.8 million in unpaid tax arrears.
Furthermore, the government was unable to collect $53.5 million in the eight financial years of the study as a result of “harmful tax incentives;” $14.6 million on account of “inadequate tax compliance by public authorities”, and $3.6 million by what ActionAid Tanzania describes as “general failure by public authorities”.
As if those were not enough of lapses in tax administration and related public revenue collection measures, the relatively whopping sum of $156.9 billion in total was “held up in unresolved tax appeals” – in jurisdictional institutions, no doubt – while about $10 billion was “lost in illicit financial flows,” pure and simple.
ActionAid Tanzania describes itself as “an associate member of ActionAid International Federation, a global justice organization working to achieve social justice, gender equality and eradication of poverty”.
The organisation started operating in Tanzania in 1998 – and is, thus, not new to what would be going on in the country.
The real McCoy
And, assuming that its findings are the real McCoy, then they are for all practical purposes a wake-up call alerting the government and its related institutions to the dire need to revisit the country’s taxation systems and processes soonest.
This is with a view to overhauling the extant tax administration systems and processes by plugging all the loopholes therein, and otherwise eradicating losses of public revenues in all their forms once and for all.
This is rendered even more urgent, especially considering that, for example, domestic revenues can only finance about 71 percent (Sh26 trillion) of the government budget of Sh36.68 trillion for the current (2021/22) financial year – with the rest of the budget, hopefully, being grants from the country’s development partners (Sh2.9 trillion, or 8 percent) and loans (Sh7.4 trillion, or 21 percent).
In other words: if the tax revenue losses were effectively consigned to the Dustbin of History, then Tanzania would be more than self-sufficient in financing its government budget year in, year out – and also be able to fund most (if not all) of its socioeconomic development projects and related activities.
As part of the title to the study findings says, there is a “need to work on closing the loopholes leading to/resulting in losses in tax revenue”. Indeed, let’s GET IT DONE pronto.