Saturday, October 30, 2010

Tanzania government urged to reduce tax exemptions, increase revenue

Tanzania could make significant savings in revenues if it granted less tax exemptions. Twaweza Head Rakesh Rajani said this when briefing reporters on research reports in Dar es Salaam yesterday. He said the government on average missed its revenue target by 453bn/- in 2008/09 and 2009/10 financial years. “In the same period tax exemptions granted reached 724bn/- per year,” he said. Rajani was presenting a policy paper entitled: “Tanzania’s Tax exemption: Are they too high and making us too dependent on foreign aid?” The research conducted by Twaweza and presented by researcher analyst Rose Aiko and Rakesh Rajani said Tanzania was leading in terms of tax exemptions among East African countries. “While Tanzania is exempting from 2.5 per cent of the budget and above, Kenya is exempting for only 1 per cent and Uganda 0.4 per cent,” he noted. For her part, Aiko said if Tanzania reduced its tax exemptions to the level granted in the neighbouring countries, a lot of billions of shillings would be saved. “In this way, the shortfall in revenue collection would have been largely offset,” she said. She explained that Tanzania relied heavily on foreign aid because it failed to raise sufficient revenues. “When exemptions are compared with grants received to fill the gap in the budget, it is evident that dependence on aid can be reduced significantly if they are implemented more prudently,” the researcher said. The researchers lamented that every year, the parliament carefully scrutinised the government’s budget but tax exemptions on the other hand, did not receive the same attention in the parliament, making them hidden expenditures. “As long as information on, who (individual, company) receives what in exemptions is not fully publicly available, it is difficult to assess the way such high amounts of exemptions benefit Tanzanians,” one of the researchers remarked. Rajani said proposals to reverse laws granting the exemptions as recent attempts had shown, typically met strong resistance from the would-be losers. They suggested that there must be a review of various existing laws which grants exemptions to minimise loopholes and introducing new exemptions less liberally and making them time bound through improving enforcement. “It is not possible at the moment to establish how such a high level of exemptions benefits the nation. With more transparency, for example, by consistently disclosing individuals and exempted companies and the exemptions granted on the internet, such analyses may be possible,” explained another researcher.

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