Monday, September 29, 2014

A Professor faults the government over FDI investment flows

A senior lecturer of economy yesterday raised his voice in protest against the continued trend by government of allowing free tax holidays to foreigners coming in the country through Foreign Direct Investment (FDI) systems, saying that a move denies the government with revenue. Professor Humphrey Mushi of the University of Dar es Salaam (UDSM) made a concern yesterday in Dar es Salaam when contributing to a debate on a topic titled, “Working with government to enhance accountability”  which was presented for discussion at Breakfast talk organized by Policy Forum held at British Council. Earlier, discussants over the topic poured much blame to the government when the topic was put across to the audience for discussion, with some saying that, the government is not serious to hold accountable its top most senior officials who makes various mistakes and never tried before the court of law. Elaborating on the idea, he said in an exclusive interview that, under the trading system, various international companies which come to invest in the country are entitled to trade feely for five years of the trading period, an aspect which the government continues to lose billions of money as tax revenues.  Free tax holidays was introduced after the establishment of an Investment Act of 1997 which provides a period of five years for establishing investment project during which projects are entitled to tax exemptions on capital goods, an aspect which he said needs to be put forward for discussion as a nation. He said offering of too much taxes to such investors, the government would not maximize profit margin for the business invested, citing an example of changing of names of business entity such as Kilimanjaro hotel and Serena hotel once used to be known as Sheraton and later Royal Palm. All these he said are such one way of taking a loophole to evade necessary taxes. He noted that, if tax revenues disappear in such a dubious manner, coupled by tax exemptions, the rate at which the national debt is growing would keep on increasing at a higher pace. He further noted that, if this situation is effectively controlled, then the government would be in a position to save a lot of money and be able to engage in various development projects without depending on external aid. However, he suggested that, the government need to make amendments on the Act so as to save the nation from losing its capital revenue as it does not match with the current business environment under which people are trading. Contributing over the topic focusing on ethical behavior, executives of some entrepreneurs in the country have noted that, there are two things which retard the entrepreneurs’ development and cited corruption and bureaucracy which h they say are still hampering their progress. Speaking in support of the matter, another renowned economist and senior lecturer of economy at University of Dar es Salaam (UDSM) Professor Haji Semboja said that, the government’s policies and laws guiding FDI were good when introduced in early 1990s with a view to attract investors. He said in a telephone interview yesterday when contacted for more comments in regard to the issue and noted that, it is high time now that such laws and policies need to be reviewed in order to save such large lump sum of money unpaid to government coffers. However, he queried if the implementation of this could be effected by government officials knowing well that, are the once who initiated such policies without knowing what could be the impact of it later on as years go by. According to Prof. Semboja, he is of the view that, government officials might be afraid or feel ashamed to revert such policies at this time when the government incurs huge loses as already they had entered contracts which are bound by such policies that favour them. He cited example of giant multi-national mining companies operating in the country after the government entered contracts with them, and noted that, the aim was to create conducive environment for them in order to enjoy their investments through physical incentive guarantee without knowing what could happen later on. He suggested that, as long as the mistake was done, then it could be good enough if the new constitution should help highlight any changes that would alter the already entered contracts and apologies for the mistake done in order to save the nation. However, he further suggested for another option that “otherwise there should be a revolutionary political change of power in the country with new set up as the current leaders have no ideas to react over the matter for they know the mistakes they had committed. “If our leaders touted for the sale of government’s houses in Oyster bay estates in Dar es Salaam city and most of them were sold among themselves silently, whom do you think is in a position to bark against what is being siphoned by investors” he querried. The Chairman of EASB Group Paul Mashauri said that, doing business in Tanzania is an uphill task owing to bad habits being practiced and shown by some service providers citing that, corruption and bureaucracy have increased at a higher level. He noted that the Small Medium Enterprises (SMEs) hardly becomes successful and never developed in the country due to increased corruption. However, he noted that, this is open right as from seeking for contracts, silences, loans and many others. “To become a successful in that environment one has to suffer as most attendants do not abide by business ethics for their minds are absorbed and engulfed with corruption”, he  said adding that in this way most of them fails to develop because the system does not provide them grow and instead they come to collect taxes only.  Another aspect he described is when one needs to take a loan from the bank and noted that, collateral is needed. But it is unfortunate that most SME traders do not have them, this leads to imminent closure of a business entity for lack of capital. However, he note3d that, the government needs to improve the environment otherwise entrepreneurs’ capital won’t develop, he said. Contributing for the suggestion over the matter, the Director of an NGO called Community Development for All (CDFA) that deals with rural empowerment Godfrey Pratace Sangana said that, researchers should be engaged in revealing wrong doers in society so as to help the police and the PCCB officials in the country get rid of them. However, he noted that, in this way the government would be at least in a position tyo end or stop completely the issue of corruption which tom some extent its roots have grown so deeper. Presenting his paper titled, “incentives for business ethical conduct”, the Director of an NGO known as Leadership Development of QI Management Solutions Joel Nanauka noted that, there is an ethical work performance on business dealings in the country that needs to be averted. He noted that, the impact of unethical behavior has increased at a higher rate by 75 percent in the country in such a way that both private and government sectors should incorporate together to tackle the phenomenon to bring the situation to normalcy so as to promote economic development. However, he has asked the media to help in advocacy the issue as the rate is increasing an aspect that it would impede important development activities from taking place, thus the mover of reducing poverty in the country would indefinitely fail.

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