DAR-ES-SALAAM, 8 June 2018– A convening of Trade Unions, Civil Society Organizations (CSOs), Student and Youth groups has concluded that Tanzania can no longer afford to lose out on large amounts of tax revenue due to tax avoidance and harmful tax incentives.under the theme “Confronting the Injustices”, it was The meeting participants agreed on a set of demands to the Tanzanian government – including reviewing all tax incentives and tax treaties, and ensuring better transparency of corporate affairs including though public registers on beneficial ownership of companies and trusts. The meeting also calls on the government to provide more resources to the Tanzanian Revenue Authority in order for them to collect more taxes to better fund public infrastructure and public services.
The meeting noted that in recent years corporate tax rates and tax contributions to national revenue have decreased while the taxes collected from individuals as personal income tax has increased, both at the global and national levels. Secondly, Tanzania loses significant amounts of funds due to harmful tax incentives to multinational companies as well as through illicit financial flows. For instance, it is estimated that the country loses US$ 531.5m annually to tax incentives. The meeting further observed that some of Tanzania’s tax treaties provisions limits the country’s ability to tax some multinational within the context of tax laws enacted in 2004.
The meeting also observed that a lack of public knowledge about the tax affairs of companies operating in Tanzania especially multinational companies. This problem is made worse by the challenge of financial secrecy. Whereas the meeting applauds and appreciate the efforts of Tanzania Revenue Authority (TRA) in collecting the required taxes, there is need for thee Government to enhance the capacity of TRA, in terms of technical support and increased human resource.
We believe that the government of Tanzania can collect more revenue by reducing unnecessary tax incentives to multinational companies. This will help to address the challenges of funding public infrastructure development and the wages of public sector workers. We also believe the government’s fight against illicit financial flows will be more successful with the involvement of all stakeholders, including trade unions and wider civil society. The meeting therefore recommends the following to the Government of Tanzania:
a) Tax Incentives
- Considering that Tanzania is losing a lot of money due to tax incentives, there is a need for the Government to make public the current tax incentives – including discretionary incentives – on the TRA website. Based on this information, the should be a review of existing statutory tax incentives through cost benefit analysis with an aim of eliminating harmful incentives.
- We further call upon the Government to halt further discretionary tax incentives until an audit is undertaken to assess and justify their benefits to the economy.
- All tax incentives should be subject to public scrutiny including by parliament, trade unions, civil societies, media and public participation.
- Special Economic Zones: The Government proposed in its last financial year’s budget to increase the number of special economic zones (SEZs).
- Review the Special Economic Zones (SEZs) through an independent cost-benefit analysis and discontinue the SEZs that are not beneficial to Tanzania.
- Review all existing statutory tax incentives through a cost-benefit analysis, and remove those that are not beneficial.
- List all current tax incentives – including discretionary tax incentives – on the Tanzania Revenue Authority (TRA) website.
- Subject all tax incentives – including statutory and discretionary incentives and those in SEZs – to public scrutiny; including the parliament, Trade Unions, media, civil society and citizens.
- Do not hand out any further discretionary tax incentives to individual companies.
b) Tax Treaties
- Create a public policy framework stating the intended objectives with Tanzania’s tax treaty networks.
- Ensure all tax treaties allow Tanzania to tax Capital Gains Tax on all capital gains of multinationals.
- Do not negotiate any tax treaties with tax havens such as Mauritius, the Seychelles or the Netherlands.
c) Tanzania’s international role
- Tanzania to proactively push for a Global Tax Body rather than the Organization for Economic Co-operation and Development (OECD) setting international tax rules.
- Tanzania to negotiate a regional minimum effective corporate income tax rate to avoid tax competition.
- Tanzania to proactively push for all multinationals operating in Tanzania having to file a country-by-country report with the TRA.
- Tanzania should introduce a public register of beneficial ownership covering all companies and trusts.
The TRA must receive additional resourcing – in terms of staff, training and IT infrastructure. This will bring in much more money than it will cost.
Source: Public Service International- Ghana