Actions against tax evasion by the late President Magufuli were arguably among the major happenings in Tanzania in his first month in office way back in November 2015. Among other things, a number of issues related to tax evasion were unfolded by the President through the Prime Minister Kassim Majaliwa. This happened at the Tanzania Ports Authority (TPA) and Tanzania Revenue Authority (TRA). Among other things, it was reported that over 350 containers escaped the tax nets of the taxman. Potentially huge tax revenues did not therefore land to the government coffers. Among the measures that were taken include but are not limited to axing those involved from their positions. This is among the areas where the late President Magufuli (pictured) started showing the direction of his administration. It is worth remembering as part of celebrating his life.
Importance of the crusade
Tax revenues constitute the greatest portion of own sources of funds for a country like Tanzania. Domestic Resources Mobilization (DRM) do contribute in the efforts of making the country free from loans and aid. Loans can be costly as interest has to be paid. Aid can have attached conditions, may not forth-come on time, in agreed frequencies and amounts. Also, funding of public goods and services by own tax revenue is very important in tax payers’ ability to hold the government responsible and accountable. This is as opposed to heavy donor dependence that may lead to governments being more accountable to donors than their citizens.
Tax collection efforts
The need for Tanzania to increase its tax collection efforts cannot be overemphasized. The conceptual and theoretical background to this is that if more financial resources in the shape of tax revenue are to enter into the Government’s coffers, there must be reduction of tax evasion and avoidance, reduction of unnecessary and unproductive tax exemptions and incentives as well as reduction of harmful tax competitions. President Magufuli’s stance on tax in general and tax evasion as evidenced in the crusade under scrutiny in this article was among the interventions to increase the badly needed tax revenues.
Public goods and services
Given what it takes to deliver the many and highly ambitious public goods and services, efforts to collect more tax cannot be escaped. With Development Partners (DPs) kissing aid goodbye and going more the business route and decreased funds over the Covid-19 pandemic, the need for increasing domestic tax revenues to finance public expenditure cannot be overemphasized. Tanzania has a rather very narrow tax base including huge informality with negative implications to tax revenues, arguably huge tax incentives, complaints on not so good tax regime from captains and titans of the industry and much more. To be able to finance the highly needed, ambitious and expensive public goods and services, the tax crusade was a must - and resonated well with the key theoretical and conceptual foundations of increasing tax revenues.
The direct intervention by the late President Magufuli on the tax matter was a huge signal on the need to improve domestic resources mobilization. These were efforts to bring to the tax net taxes from various sources including from international trade. One expects similar efforts by those currently in power. However, it will be very important to learn from lessons of experience on what works and what does not work in tax crusades.
Among other things, good and important as they are, tax crusades should take participatory approaches and adhere to all good characteristics of good tax system.
Among others, tax crusades should not lead to constraining businesses and investments. Tax crusades should ensure that taxation is becoming not just a revenue tool but also a development tool. There should be investments in tax revenue sources so as to make them more productive and yield higher taxes.