The International Monetary Fund (IMF) has raised concerns over how Tanzania Revenue Authority (TRA) is looking for additional revenues by issuing agency notices and seizing money from taxpayers’ bank accounts without following due process.“Tanzanian taxpayers face more frequent visits than taxpayers in SSA (sub-Saharan Africa) and LMICs (low- and middle-income countries), and overly aggressive pursuit of additional revenues by the Tanzania Revenue Authority, including by issuing agency notices and seizing money from taxpayers’ bank accounts without proper legal recourse,” the fund disclosed in its latest country report for Tanzania for July.“These practices led to countrywide strikes by domestic retail traders and calls for dialogue by the diplomatic community in mid-2024.”IMF says that high compliance costs associated with a complex tax system have weakened the business environment in Tanzania, with key challenges including cumbersome tax filings, frequent changes in taxation requirements, and delays in reimbursements.“The income tax on companies with perpetual unrelieved loss for three consecutive years discourages start-up firms,” it says.

 

According to IMF, Tanzania’s administrative process for value added tax refunds remains very slow, constraining taxpayers’ cashflow management.“The authorities have made progress in clearing verified VAT arrears on timely basis. However, the VAT Act currently only allows a business (other than a qualifying exporters) to claim a refund six months after it arose, contrary to good practices where refunds are paid or declined within 30 days from when the return is filed,” the IMF said.“Furthermore, VAT refund claimants are required to submit a ‘Certificate of Genuineness’ from a TRA-registered tax consultant, effectively auditing all refunds before they are paid, irrespective of risk, and adding to the taxpayer’s cost of compliance.”Read: Tanzania loses correspondent bank on weak anti-money laundering lawsThe lender also cited declining credit to the private sector and lack of access to reliable electricity as other key challenge for businesses operating in Dodoma. It said domestic credit to the private sector in Tanzania is among the lowest in the region.

IMF, however, notes that Tanzania ranks better than its peers in terms of bribery, although corruption vulnerabilities still exist.

In 2023, only 7 percent of firms reported to have experienced at least one bribe payment request, compared to SSA and LMIC averages of 21 percent and 18 percent, respectively.

For instance, as of 2023, outstanding domestic credit to the private sector stood at 16.4 percent of GDP in Tanzania, compared with 31.6 percent in Kenya, 22.7 percent in Rwanda and a SSA average of 33.4 percent in 2022.

In 2023, Tanzanian firms ranked access to finance as the most binding constraint to business, with about 84 percent of firms relying on own funds to finance purchases of fixed assets, which is high even by regional standards.“This reflects a shallow and underdeveloped financial sector, dominated by banks, with only nascent capital markets,” the IMF said. “The credit market is also constrained by underdeveloped financial market infrastructure, limited availability of credit information, and lack of effective collateral registry system.”According to the report, access to reliable electricity continues to be a key challenge for businesses in Tanzania, with access to electricity increasing from 14.8 percent of the population in 2010 to 48.3 percent in 2023, but still lagging peer country levels such as Kenya (76.2 percent), Rwanda (63.9 percent) and Uganda (51.5 percent).“Although the percent of firms experiencing electrical outages is low compared to regional averages, a significant challenge for those with electricity connections is the poor reliability and quality of service, caused by a deteriorating network with overloaded transformers, distribution feeders that are longer than industry good practice, poorly configured networks that hinder isolation of faults, and limited operations and maintenance services,” says report.

© Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).