World Bank Urges Tanzania to Reform Tax System
A new report from the Word Bank is urging Tanzania to reform its tax system, in order to maintain its impressive rate of economic growth.
Tanzania’s impressive economic performance over the last decade has seen it become one of East Africa’s fastest growing economies. However, the World Bank insists the country needs to improve in tax collection is it want to continue this rate of development.
Why should Tanzanians pay taxes?
The report, entitled Why Should Tanzanian’s Pay Taxes: The Unavoidable Need to Finance Economic Development, “explores options for developing an affordable, fair and transparent tax collection scheme and the benefits from a well-designed and managed tax collection system for the country’s poor population and future economic growth”.
Or to sum up: Tanzania needs to collect more taxes.
The report says tax revenue reached $6 billion in 2014, which was enough to cover almost three-quarters of government expenditure. Aside from the gap in covering government spending, this figure wasn’t enough to provide the necessary investments for a country growing at the rate Tanzania currently is.
The World Bank says Tanzania needs to generate more revenue through taxation so it can invest in infrastructure and social services to cater for its rapidly growing population.
Recommendations from the World Bank
The report insists any Tanzania tax reforms must be affordable, fair and transparent. These same three words appear throughout the report and the World Bank offers recommendations based on these “three pillars”.
Pillar I: The System Must be Affordable
“Currently, paying taxes in Tanzania for individuals and businesses alike is expensive and often requires a professional to understand the complicated tax code… Once transaction costs drop tax compliance and collected revenues should rise.”
Pillar II: The System Must be Perceived as Fair
“Almost all of the country’s tax revenue (close to 90%) is generated in Dar-Es-Salaam. The report recommends the Government broaden the tax base, promote compliance in all regions, especially in larger hubs, and alter property taxes to improve land management as a means to increase the pool of available revenues.”
Pillar III: The System Must be Transparent
“Steps to publish revenue collection and tax exemption data, along with verified company payments from all sectors, and actions to strengthen enforcement of sanctions for tax evaders will all help to build the trust among citizens that the taxes are being used to deliver public services, according to the report.”