Home The News: AS TRA CLAIMS RECORD TAX COLLECTIONS Analysts attribute it to rising inflation, falling shilling
AS TRA CLAIMS RECORD TAX COLLECTIONS Analysts attribute it to rising inflation, falling shilling
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Friday, 06 January 2012 12:11

THE Tanzania Revenue Authority (TRA) reports revenue collections amounting to Tsh2.4 trillion in the first five months of the 2011/12 financial year to November 30, 2011. This is higher than the Tsh1.993.907 trillion collected during a similar period in the 2010/11 financial year.

According to the Authority’s Principal Taxpayer Education Officer, Hamisi Lupenja, this “indicates that TRA is getting closer to the set revenue targets for the 2011/12 financial year,” which ends on June 30, 2012.

Responding in writing to Business Times on behalf of the director of Taxpayer Services & Education Department, Lupenja said the Government had planned to collect Tsh6.2 trillion from the national tax base during the ongoing financial year.

“During the first quarter of the year that ended on September 30, 2011, TRA recorded total revenue collections of Tsh1.5 trillion.”

In the event, all indications are that the Tsh3.1 trillion revenue target set for the first half of the financial year (July 1-December 31, 2011) will be realized. As it is, TRA   collected revenues to the tune of Tsh1.006 trillion in October and November last year, and projected to collect another Tsh0.5 trillion in December.

Lupenja said “this positive performance has been contributed to by improvement in TRA's Information & Communication Technology (ICT) systems whereby, tax assessments and payments are effected on-line, through the banking and mobile telephony networks. In a way, this has increased services to customers — and, hence, much improved tax collections.

“Effective and efficient monitoring and administration of taxes through audits and enforcement procedures for taxpayers (who were lagging behind with arrears) have contributed to such success,” Lupenja added.

Furthermore, TRA has been broadening the tax base, registering more taxpayers from the informal sector of the economy. This is with a view to boosting revenue collections.

“All these measures have in principle increased the voluntary compliance level among taxpayers, and public awareness in general,” Lupenja surmises.

However, analysts who spoke to Business Times on the matter attributed the increased revenue collections to the rapidly rising rate of inflation, compounded by depreciation of the national currency against Tanzania's major trading partners and their harder currencies, mainly the US dollar!

The analysts also cast doubt over claims that tax revenue collection performance is hunky-dory; that these are days of wine and roses, happiness and prosperity.

For example, they noted that, while the Government is struggling to increase tax collections, the rising inflation has already created a budget deficit of Tsh780 billion in FY-2011/12!

Perhaps not unexpectedly, the Government strenuously denies this, saying it is financially in good shape!

This notwithstanding, however, shortage of revenue is already forcing the Government to increase its domestic borrowing, mainly in the banking sub-sector — something which economists have warned would ruin the flow of credit to private sector.

The Government plans to spend a total of Tsh13.5 trillion during the 2011/12 financial year. Tsh6.2 trillion of that sum was to be sourced from taxes, with the remaining amount being obtained through concessionary loans and grants.

To that end, Dar planned to borrow Tsh1.2 trillion from local capital markets over the financial year. But that amount was  borrowed in just the first half of the year — thereby increasing fears that the Government would continue to borrow beyond the original threshold to cover revenue gaps.

Prof. Humphrey Moshi of the University of Dar es Salaam’s Economics Department was of the view that the high level of revenue collections might be influenced by the increased inflation.

As it is, according to the National Bureau of Statistics (NBS), the rate of inflation was 19.2 per cent last November, up from four per cent in January 2011!

Speaking to this paper recently, Prof. Moshi noted that the Government should realize that it is currently facing financial problems.

“There is a huge demand for finance, mainly for recurrent expenditure. As you may be aware, University lecturers, school teachers, are demanding their pay arrears,” he said.

Noting that the Government should not be complacent with  the current tax collection figures alone, Prof. Moshi counseled that more work needs to be done in order to cover up the revenue gap that is being enlarged by the rising inflation rate.

“There is a need for TRA to expand the tax base even further — and improve its systems... There still are a lot of loopholes that make it easy for potential taxpayers to evade taxes,” the good professor stresses.
The Authority also needs to make sure that the tax system as a whole is efficacious — including the use of electronic fiscal devices (EFDs) by all VAT-registered traders, with purchasers making a habit of insisting on being given an official receipt for every purchase they make!

“TRA must also continue to increase awareness through tax education to the public by way of tax seminars, leaflets, brochures, television and radio programmes,” he counsels.

Commenting on the tax revenue collections issue, the
managing director of Dunduliza Company Ltd, Tasilo Joseph Mahuwi, said TRA could be collecting more revenue —especially from small & medium enterprises (SMEs) — if electricity supplies were adequate and assured at all times.

“The little that TRA is collecting today is from large enterprises such as Mohamed Enterprises, Azam Ltd, and a few other businesses. Tax revenues could be higher if power supplies were reliable... Imagine the power shortage problem Tanzania has been going through in the last year,” Mahuwi lamented.

Mahuwi was the Principal of the Moshi Cooperative College — now the Moshi University College of Cooperative & Business Studies (MUCCoBS) from 1974 to 1990. He is knowledgeable in financial and cooperative matters, and is currently working through Dunduliza to promote Savings and Credit Cooperative Societies (SaCCoS).

“TRA is not getting enough tax revenues from the SaCCoS system as it should, a sub-sector that is constituted by over 75 per cent of the national population and workforce,” Mahuwi, stresses.

“In order for the Government to get what it deserves from the Cooperatives, there must be a concerted drive to control  SaCCoS managements to make them accountable and reporting — just as the central Bank of Tanzania controls the commercial banks and financial sector as a whole.”

Another observer, Charles Edward Nyange — managing director of the Nyange Audit Company —  said “tax revenue collections should not be treated as the be-all and end-all of growth of the national economy!”

Noting that severe power shortages lead to reduced industrial and other economic production, Nyange said this naturally results in reduced tax revenues. Public revenues could be double what TRA is collecting today if adequate power supplies were assured — and SMEs and the informal sector in general were effectively monitored for tax purposes.

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Last Updated on Friday, 06 January 2012 12:26


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