I have written on taxation and development before: First on tax base expansion; and then, on why tax compliance and collection should not be a little bit scientific. Today, I will build on the latter to explore the question: Isn’t it time to unpack our thinking on taxation and development?
Let me borrow two quotes: one from Henry Hazlitt which says: ‘The government has nothing to give to anybody that it does not take from someone else;’ and the other from US President Gerald Ford in his address to a Joint Session of Congress on August 9, 1974: ‘A government big enough to give you everything you want is a government big enough to take from you everything you have.’
At the centre is mobile money transaction levy, SIM card levy set to take off in August, two mega projects in progress: standard gauge railway (SGR) and Nyerere Hydroelectric Power Dam... A rush to satisfy political hunger zone in a bid for another five-year term renewal four years down the road - and, lastly: inept thinking on the tax base expansion.
In my view, Henry Hazlitt was right... So was President Ford. The role of government is limited, it cannot provide everything to satisfy everyone as it has nothing to give to anybody but what it first takes from someone else. Yes, when the government becomes too big to give everything we need, in the very same scale it will tend to take so much from us.
Government is duty bound to provide goods and services that private sector cannot provide. It is also duty bound to play an oversight role on the economy while strengthening private sector to take a lead on production. That is why we pay taxes to finance provisions of such goods and services.
On the contrary there has been an apparent misconception on the role of the government on development and taxation being driven by a number of factors that include: one a rush of the government to satisfy political hunger zone, financial year in financial year out so as to win a re-election five years down the lane ballooning the government budget every financial year with an absolute no knowledge of how to pay for it.
Two, an inept thinking on tax base expansion which often results in piling up taxes on the very same sources instead of expanding it by taxing less and collecting more while enticing creation of new enterprises across the board, supporting where necessary strategic sectors of the economy where we hold competitive advantage over other economies. We have oftentimes urged folks in charge to get out of the business as usual syndrome.
We must have an inward-outward looking as we progress going forward. The 2020/21 government budget, for example, has an awkward and unfortunate one - mobile money transaction and simcard levy. Ladies and gentlemen tax is normally charged when income, gain or benefit is realized. Whatever name we can call it, levying mobile transaction and SIM card is wrong and it is an erosion of capitals which were otherwise to be used in production by the private sector. How can one levy an infrastructure that facilitates production? Aren’t we far better than that? Are we falling short of folks who can at least do justice to human reasoning?
My last point is: we have so much in our docket, two mega projects in progress siphoning so much from our national coffers but set to be completed within the next fiscal year - both the SGR and the Nyerere Hydro-Power Dam.
If I were in charge, now is the time to buckle up and brace for what potentials these two projects might bring. If it is horticulture sub sector, support among other things, setting up of cold rooms to extend shelf life of the farm produce with high demand in international markets. Drill bore holes in all basins where water table is high to aid irrigation farming that meet the international farming practice. If it livestock farming - support practically the sub sector to realize its full potential. This is how tax base expansion is earned, it does not happen by itself.
We must get focused - we can’t do jack of all trades with no clear financing options in sight stampeding everything on the way. The government must get satisfied to prudently spend what it justly collects.
This is no time to balloon the government, as it gets bigger and so is what it takes away from production pattern making private sector to stifle. This is instead time to start nursing the private sector to take charge of the economy. It is time for incubation of new enterprises. It is time to practically support all sub sectors that largely contribute export industry. It is time to take a cold hard look at the future prospects. I can write no more!
Thomas Maqway is a policy analyst based in Dar es Salaam. He can be reached [email protected]