Governance and Mobilization of Resources: Improve Service Delivery in the Country
The Government has a big responsibility to provide citizens with better community services. For the Government to perform this responsibility to the community it needs various resources including financial resources. Failure of the Government to collect enough revenue reduces its ability to provide better services to its people.
Various studies indicate that Tanzania is faced with a number of challenges that have resulted to failure to mobilize adequate domestic resources which could be used to improve delivery of services.
In 2012 the Interfaith Standing Committee on Economic Justice and the Integrity of Creation (ISCEJIC), released a report indicating revenue loss of between US $ 847 million and US $ 1.3 billion. This loss of revenue was through tax incentives, tax evasions and capital flight.
The current situation indicates that the loss of tax revenue has multiplied to reach US $ 1.83 billion, equivalent to about TSh.4 trillion. This money would have supported the Health Sector budget threefold, or two times the Education Sector budget for the fiscal year 2016/17.
Apart from the studies carried out in 2017 indicating an increase in tax collection efforts, still the Government faces problems like;
- Tax evasion
- Tax exemption
- Illicit financial flows
- And other losses through public purchases.
Tax Exemptions: The 2015/16 report by the Controller and Auditor General shows that the Government granted tax exemptions worth TSh. 1.10 trillion, equivalent to 1.14 of national income, whereas the Government target is to reduce tax exemptions to below 1 percent of national income.
The CAG found out that tax exemptions have been benefitting unintended individuals and companies. For instance, in the period of 2012 to 2014, 238 vehicles were brought into the country using names of two invalid tax payers. In 2015/16 the Government incurred a loss of Tsh3.46 billion through tax exemptions to people who were not justified.
Illicit financial flows: New estimates show that the country is losing revenues amounted to US $464 million per year.
Public purchases: In 2015/16, the CAG revealed shortcomings in the award of tenders, executions and supervision of contracts which were executed contrary to the law and laid down regulations. The flouting of these regulations is an indication of revenue loss through misappropriations.
Tax collection: It has been found out that very few people, particularly those in the formal sector, are the ones who pay tax, thereby shouldering the burden of non-taxpayers, who continue to benefit from goods and public services in the same way as those who pay tax.
The 2015/16 CAG report indicates that about Tsh. 588.8 billion was not collected from various taxpayers.
Likewise, it was found out that out of 9,743 eligible tax payers who were registered to pay Value Added Tax (VAT) in 2015 to 2016, it is only 1,578 which is 16 percent, who used the EFD machines. Of the 49,009 tax payers required to use the EFD machines it is only 9,127 taxpayers – which is 18.6 percent – who have the EFD machines.
Recommendations: The following recommendations can improve tax collection and expenditure of public resources.
- Government should reduce tax exemptions to the intended target.
- Improve openness in the granting of tax exemptions.
- It should continue educating the people and taking punitive action against those who involved in violations of laws and regulations regulating expenditure of public funds.
- It should distribute EFD machines and show the importance of EFD and institute tax collection electronically, even at municipal level. It should also implement the review of various laws so that all companies pay required tax.
- People should realize that it is their responsibility to pay tax for development.
By so doing, a lot of revenue would be collected and therefore be in a good position to receive important and better services.