Review, tighten tax collection-clerics

BabuK · 2012-06-14T03:53:44+00:00

The country loses 1.59 trillion/- annually through capital flight, tax evasions, exemptions and incentives given to investors, a study released in Dar es Salaam has revealed. The report, commissioned by the Interfaith Standing Committee on Economic Justice and the Integrity of Creation (ISCJIC), entitled The One Billion Dollar Question: How Can Tanzania Stop Losing So Much Tax Revenue, said the country was losing USD 1bn (equivalent to 1.59 trilion/-) every year because of loose taxation systems and frameworks. As a result of this, every year, a vast amount of potential tax revenue that could be used to reduce poverty fails to end up in the government treasury; much is simply leaving the country, said Catholic Bishop Paul Ruzoka, Chairman of ISCJIC, during the official launching of the report. The report is a product of the study commissioned by the interfaith committee to establish the magnitude of tax revenue losses in Tanzania and recommend measures to minimise such losses. Announcing the research findings, Bishop Ruzoka said Tanzania provides an array of tax incentives and exemptions, especially to mining companies and firms operating in the Export Processing Zones (EPZs). But many of these exemptions represent an unnecessary loss of revenue, he said, noting exemptions given to corporations have deprived Tanzania of an average of 458.6 billion/- a year in three years 2002/09-2010/11. Clerics criticised government claims that tax incentives offered in the EPZ were necessary to attract foreign investments. Our analysis is that Tanzania has lost more revenues from tax exemptions given to corporations in the last three years than it has received in all foreign investment since EPZs were established in 2002, said Bishop Ruzoka. Mining companies, he said, are paying around USD 100 million a year in all taxes which amounts to less than seven per cent of the value of mineral exports, he said, adding: Their tax exemptions are low mainly because of tax incentives they receive. Moreover, around 65 per cent of mining taxes are paid by employees of the companies, in the form of Pay As You Earn (PAYE), not by the companies themselves. The new mining Act passed in 2010, brings some important changes to the mining sector but in effect applies only to new projects since existing gold mines remain governed by the generous fiscal terms and tax stabilisation clauses outlined in individual and mineral development agreements. The study also mentioned illicit financial flows (which entail the disguised expatriation of money, usually to developed countries or tax havens) by multinationals as one of the sources of revenue losses. Illicit capital flight can involve transactions arising from criminal activities, corruption or tax evasion by transactional corporations. It can also be done in the form of trade mis-pricing which involves a multinational company deciding the allocation of profits between its subsidiaries by inflating and deflating import or export prices for goods traded between those subsidiaries, in order to reduce its tax liability. According to our study, illicit capital flows from Tanzania range from USD 94 660million a year while illicit flows from trade mis-pricing alone amount to UDS 109 127 million a year. These already large figures are likely to be gross under-estimates due to lack of accurate data. In his presentation, Dr Honest Ngowi, senior lecturer at Mzumbe University, one of the experts commissioned to conduct the study, pressed the government to address tax revenue losses with a sense of urgency and take steps to increase revenue collections by extensively reviewing tax incentives with a view to reducing or removing them. He said: What tax incentives remain should be linked to performance requirements for sectors such as employment creation and technology transfer. On top of that, the government needs to provide, during the budget process, a publicly available expenditure analysis, showing the cost to the government of various tax incentives and the beneficiaries. Sheikh Salum Fereji, Vice-Chairman of interfaith committee, said tax revenue losses means less money for financing development activities and programmes, accusing the government and revenue collection bodies of laxity and failure to broaden revenue collection base and control losses. Its impossible for the government to meet its budgetary obligations, thus move Tanzanians out of numerous social and economic problems, if it fails to collect taxes and develop new sources of revenues, said Fereji. When contacted, for comment on the report the Tanzania Revenue Authority (TRA) Commissioner General, Harry Kitilya, declined, saying he was yet to see and read the report. SOURCE: THE GUARDIAN

Thread starter BabuK
Start date Jun 14, 2012

BabuK

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Review, tighten tax collection-clerics

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