Isn’t the Finance minister’s proposal an analogy of unpopular head tax?

By Thomas Akonaay Maqway

The Finance Minister is partly right but needs to slow down a little bit and pause for a reality check by embracing a forward looking strategy in expanding the tax base. As I argued in this space, tax base expansion is a process and does not happen overnight. It is earned with patience and perseverance. It cannot be achieved in one or two fiscal years. Impartiality is needed in search of means to expand the tax base and so too the use of incentives to achieve it. If we fall short in these fronts; the false start will be inevitable and the analogy of the unpopular head tax will undoubtedly surface again.

The assertion of the Finance Minister that all Tanzanians at majority age should be registered as taxpayers to record all transactions related to sales and purchases countrywide is an ice breaker. As I argued in this space, there is no need to reinvent the wheels, instead, the government should speedily harmonise its systems. The suggested harmonisation is in two levels. The first level should be between Tanzania Revenue Authority (TRA) and National Identification Authority (Nida) where all persons attaining majority age should be identified as taxpayers by using their National Identity Card Number instead of Tax Identification Number (TIN). The second level should be between the National Identification Authority (Nida) and National Internet Data Centre (NIDC) where the N-Card number should be replaced by a National Identity Card Number. What next?

President Samia Suluhu Hassan has recently called for all businesses in Tanzania to use Electronic Fiscal Device Machines where both purchases and sales data will be captured for a just tax assessment. This is a bold and mind boggling call. But, it can be done with two sacrifices to make. As I earlier argued in this space - tax base expansion is give and take and so is the time to brace for the impact to make it come to pass. What are these two sacrifices? One; the government should and must foot the cost of procuring electronic fiscal device machines, but two, as an enticement, the government must be ready to forego the value added tax by 8 percent. I will explain the latter in the last segment of this treatise, but for now let us dig into the first sacrifice the government has to make.

Currently, the cost of procuring the electronic fiscal device machine is front-loaded to business persons and later back-loaded to the government. This approach has undoubtedly put a burden on both new and existing businesses in the process, discouraging the uptake of electronic fiscal device machines unless one is forced to. This must change to echo the call of Her Excellency by supplying all business persons with Electronic Fiscal Devices Machine at no cost either during renewal or acquiring of new business licenses to capture both purchases and sales data.

But, wait a minute! What will disturb the current ecosystem and push the taxpayers to opt for an electronic payment system over cash? The answer to this question rests on one simple principle in economics; that changes in incentives influence human behaviour in a predictable manner. At the core of it is the call for slashing the value added tax from whooping 18 percent down to 10 percent. The slashed 8 will be used as tax rebates to taxpayers for every transaction they make using their N-Card at the point of sales - Electronic Fiscal Device Machine. To recap on this - all taxpayers who will opt for a cash transaction will not get 8 percent tax rebates of the particular transaction to their N-Card account instead those who will opt for using their N-Card to make purchases, the 8 percent tax rebate of the said transaction will be credited to their N-Card account.

Lastly, the implementation of this nationwide program should be carried out carefully by locking out all possible tax evasion along the way. If we make it fast - we will end up stampeding everything on the way and get none of it. To wrap this treatise up; it is my conviction that the proposal of sending every registered taxpayer with a Nida number a tax estimate payable online not ideal. The possible outcome of this proposal is likely an analogy of the unpopular head tax - the road that any sensitive politician won’t pass. I can write no more!

Disclaimer: The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Citizen.