Who pays Tax in Tanzania?

Respicius Mwijage · 2024-06-01T14:10:44+00:00

In Tanzania, there is a widespread misconception that about 5 million Tanzanians out of over 60 million citizens are taxpayers. However, this belief does not reflect the true nature of the Tanzanian tax system. A closer look reveals that nearly every citizen contributes to the nation's tax revenue, predominantly through indirect taxes. Understanding the Tax System The idea that only a small fraction of Tanzanians are taxpayers likely stems from a misunderstanding of what constitutes tax payment. While direct taxes, such as income tax, may indeed have a smaller base of registered taxpayers, this does not account for the full picture. Indirect taxes, embedded in the costs of goods and services, affect virtually everyone. Value Added Tax (VAT) One of the most pervasive forms of tax in Tanzania is the Value Added Tax (VAT). VAT is levied on most goods and services, meaning that every time a Tanzanian buys groceries, clothes, or pays for utilities, they are indirectly paying VAT. This form of tax does not discriminate by income level or employment status; everyone who consumes goods and services is contributing to the national tax revenue. Excise Duty and Import Duty In addition to VAT, excise duty and import duty are other forms of indirect taxes that impact the majority of Tanzanians. Excise duties are imposed on specific goods such as alcohol, tobacco, and fuel. Import duties are taxes on goods brought into the country. Since many products consumed in Tanzania are imported, these duties are a significant source of revenue and are indirectly paid by all consumers. Direct Taxes and Registered Taxpayers The visible layer of the tax system includes direct taxes, which are more commonly associated with registered taxpayers. These include: Income Tax: Levied on individuals and corporations earning above a certain threshold. Withholding Taxes: Applied on various transactions such as interest, dividends, and payments for services. Corporate Taxes: Paid by registered businesses on their profits. The focus on registered taxpayers often highlights the relatively small number of agents actively involved in the formal tax collection process. These registered businesses and individuals are responsible for collecting and remitting taxes to the Tanzania Revenue Authority (TRA) and local government authorities. Expanding the Tax Base While it is true that the number of formal tax agents is limited, the goal should be to broaden the tax base rather than overburden existing taxpayers. This involves: Enhancing Compliance: Encouraging more businesses and individuals to register and comply with tax regulations. Simplifying the Tax System: Making the tax system more accessible and understandable to reduce evasion and increase voluntary compliance. Public Awareness: Educating the public on the various forms of taxes they already pay and the importance of contributing to national development. Conclusion The idea that only a small fraction of Tanzanians pay taxes is a misconception. In reality, almost every citizen contributes to the tax system, primarily through indirect taxes such as VAT, excise duty, and import duty. The focus should be on expanding the tax base and ensuring that the tax system is fair and efficient. By doing so, Tanzania can increase its revenue without overburdening the current pool of taxpayers. Understanding and addressing these misconceptions can help in creating a more informed public, which is crucial for fostering a cooperative relationship between the government and its citizens in the realm of taxation. The author (Respicius E. Mwijage) Tax lawyer with experience in Tax Dispute Resolution Mob: +255 688 526 718 E-mail: remwijage@yahoo.com

Thread starter Respicius Mwijage
Start date Jun 1, 2024
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tax administration system tax mtandao tra tanzania who pays tax in tanzania

Respicius Mwijage

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Who pays Tax in Tanzania?

Respicius Mwijage

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