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The government has been urged to support the cost-sharing and applications of joint title-deeds or co-occupancy in land titling in Tanzania to reduce the burden borne by poor individuals when seeking to formalise land ownership and to tackle the inequality between men and women in land access. This call was made during the August 2018 Policy Forum Monthly Breakfast Debate.

Presenting a study that was conducted by OXFAM Tanzania in cooperation with the National Land Use and Planning Commission entitled “Leveraging Cost in Land Titling: What are the Insights from Stakeholders?”, Dastan Kweka stressed the importance of land titling in allowing for simple, quick and inexpensive land transfers. “Titling protects the property owner's legal title to land for both the seller and purchaser of property, and is critically important for economic stability, investment and social stability.”

Kweka also noted this was increasingly becoming more important in light of the rapid population growth, an influx of large-scale land-based investments and the subsequent increase in land conflicts have made land use planning and titling increasingly important.

Land use planning, however, remains an expensive undertaking and out of reach for many resource-starved villages. Research has shown that cost is a leading single obstacle. For instance, Ali et. al., (2014) noted that “prices—rather than other implementation failures or features of the titling regime—are a key obstacle to broader inclusion in the land registry.” In addition, Stein, et al., (2016) observes that this is the case due to multiple fees, that is, “application fees, technician fees for plot surveys, ‘facilitation’ costs to the village land committee and district land registrar, court registration fees, lawyers’ fees, and travel costs” (Stein, et. al., 2016).

Nonetheless, the cost of undertaking the process of land titling is, in general, prohibitively high. From a research report on mechanisms for leveraging cost in rural land tilting as practiced by stakeholders in Tanzania. Leverage, in the context of the study, is defined as a range of measures employed by stakeholders to cut costs and share the burden.

Furthermore, he stressed that cost is not an insurmountable factor and that cost sharing is key in expanding affordability, enhancing ownership and accelerating the titling process but there have been limited efforts to seize the opportunity that land titling provides to address gender inequality in land ownership.

Prof. Faustin Maganga, from the University of Dar es Salaam, highlighted that cost sharing is key in leveraging cost and should be encouraged. Its implementation, however, must be informed by a careful economic assessment of the targeted group to ensure the rate set for contribution is affordable.

Ownership, control and management of land in Tanzania, nevertheless, is vested in the President as trustee for and on behalf of all citizens of Tanzania.  For the purposes of management only, all land is classified as general land, village land and reserve land. The President has powers to transfer land from one category to another. Reserve lands are forests, wildlife areas, etc., which constitute 28 percent of all lands. Village land is all land that falls under the jurisdiction of the existing 10,832 registered villages in the country which constitutes nearly 70 per cent of all land. The rest is mostly urban land and that land already under granted titles. The Commissioner for Lands is the sole authority responsible for overall administration of all lands but has delegated his powers to authorized land officers at district/municipal level. The Village Councils manage all village land with  advice  from  the  Commissioner  for  Lands.  The reserved lands  are managed  by  statutory  bodies Tanzania  Land  Policy  and  Genesis  of Land Reforms (2012).

Henceforth, Land use planning and titling offers an opportunity to promote gender equality in land ownership through effective participation of women throughout the planning cycle and encouraging co-occupancy.

The following recommendations came out as part of the debate;

Budgetary investment in land titling from the government has been limited due to limits in cost recovery. Nevertheless, the government should explore options for recovery avenues that encourage compliance and enhance support for the initiative.

To secure utilization access and rights to land and natural resources for pastoral communities and enhance their participation in natural resource management.

To reduce conflicts related to incompatible resource utilisation, especially between agriculture and pastoralism, and pastoralism and wildlife conservation.

Prof. Maganga also stated that the best way to protect land rights is through the formalization of land which provided secure village boundaries though issuing of Certificates of Village Land (CVLs), land use planning and individual plot focused certificates of customary rights of occupancy.

Photo by Reinout Van Den Bergh

Tanzania has nine Double Taxation Agreements (DTAs) in place with the following countries: Zambia (1968), Italy (1973), Denmark (1976), Finland (1976), Norway (1976), Sweden (1976), India (1979), Canada (1995), and South Africa (2005). Tanzania is also currently negotiating DTAs with the Netherlands, the United Kingdom, the United Arab Emirates, Mauritius, Kuwait, Iran and China without any publicly known or democratically scrutinised negotiation policy. In addition, Tanzania has bilateral investment treaties with nineteen countries and seven other investment agreements with regional economic blocs.

The latest Agreement between Tanzania and India for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income was signed in Dar es Salaam on 1st January 1979 This Agreement applies to taxes on income imposed on behalf of a Contracting State or of its political subdivisions or local authorities, irrespective of the way they are levied.

The Agreement between Tanzania and South Africa for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income was entered into on 15th June 2007.

This report presents study findings on three main items: a critical review of DTAs signed by Tanzania with India and South Africa; an analysis of the dangers that DTAs signed by Tanzania with India and South Africa pose towards financing development in Tanzania; and policy recommendations on the key considerations that Tanzania needs to incorporate during the negotiations or re-negotiation of such DTAs. Click here to read more

Tanzania is endowed with various precious minerals such as gold and diamond and like other African countries rich in resources, this fact raises questions on why the extractive does not contribute enough to the economic development of the country. On the contrary, it is widely believed that the companies involved in the sector on the continent disproportionately benefit. To add salt to the wound, the fact is that the sector not only has had so far had little net fiscal impact and this is unlikely to change in the coming years, but the IMF reports that mining revenues for governments are not expected to grow much soon partly because of large embedded tax holidays. Furthermore, revenues from the extractive industry for governments are not expected to rise because the sector has been marred by secrecy and corruption leading to scandals like those involving mining companies that in recent years are said to have been understating their tax liabilities in Tanzania.

Presenting at the July 2018 Policy Forum’s Monthly Breakfast Debate on ‘The Extractive Sector in Tanzania: What are the Key Political Economy Issues?’ Thabit Jacob (PhD) from the University of Dodoma argued that transparency seems to be a dying issue because the government seems to be no longer interested in it. Jacob explained that despite the good intentions shown by the government to protect the country’s resources the challenge remains to foster transparency in the Extractive Industry.

Specifically, he noted examples whereby the details of a tax settlement with a particular company was undisclosed, citizens’ diminishing role and ultimately being relegated to mere spectators and ongoing talks between the government and key companies in recent controversies remaining opaque without updates to the public.

He also noted that there is a noticeable securitization of the extractive sector in Tanzania whereby projects are being framed as national priorities on which the fate of the nation depends, and extractive industry activists are increasingly being branded as anti-development and unpatriotic and to in some extreme cases, ‘enemies of the state’ and the executive admits to wiretapping individuals. In this worrying environment, CSOs are seen as a distraction and with the overall closing civic space, concerns are that legitimate activism may come to be considered criminal or subversive activity.

These transparency and securitization points were also stressed by the President of Tanganyika Law Society (TLS) Fatma Karume who emphasized on the rule of law and distribution of power. She lamented lack of openness in decision making especially in the matters that involves public resources citing an example of the secrecy in the negotiations between the committee appointed by the President and the Acacia Mining Limited. She further said that political powers should not defeat the Constitution, the citizens are the owners of the resources and must be involved in the decision making and kept informed.

Contributing in the discussion, Prof. Hamudi Majamba from University of Dar Es Salaam School of Law stressed on the importance of the international arbitration since Tanzania is a signatory member in a number of justice conventions, treaties and agreements. However, he doubts on the sufficiency of the state attorneys as representative of the government in international arbitration.

He said although access to international arbitration is limited, the Tanzania government should seek consent with the citizens and investors to access international arbitration by the virtue of fairness since it is not a guarantee that the domestic system will always provide justice and impartiality.

Prof. Majamba also commended the government for being pro-artisanal and small-scale mining since the President ordered the Ministry of Energy and Minerals to revoke the prospecting licenses for the country’s biggest mining company in gold rich area in the North-Western part of Tanzania to allow more than 5000 artisanal miners to gain to the field.

The debate recommended Public and Private Partnership as an alternative way for state owned companied to operate with high degree of efficiency and effectiveness. This came to the discussion when the audience cited bad examples from African countries such as Angola and DRC who have been using militaries involvement in the Extractive Industry operations leading to the negative impact such as serving the interest of the few elites.

 

CSOs in Tanzania have called for increased clarity of the division of functions and responsibilities of the central and local government administrations in the country if decentralisation by devolution is to work. This includes clarification on property registration and valuation responsibilities, and obligations on the maintenance of property registers and revenue data. This was said during a morning public discussion hosted by the Policy Forum entitled ‘Taxing the urban boom in Tanzania: Central versus local government property tax collection’ which took place in Dar es Salaam on June 29, 2018.

Speaking during the presentation Dr Lucas Katera of REPOA stressed that it was high time politicians and officials support the national tax administration as it clarifies the connection between tax reform and decentralisation policies.

“If the national government truly aims to pursue fiscal decentralisation by devolving tax and spending powers to lower levels of government, a minimum degree of autonomy for sub-national governments over own revenue generation and expenditures is required,” he insisted.

Concerning a fall of collection of revenue at the local level, Dr Katera was of the view that the drop has been attributed to the transfer of some Local Authority revenue sources to the Central Government - including property tax and crop levies to mention but a few.

The Controller and Auditor General’s report also shows that revenue collections at the local level dropped from Sh 628 billion in 2015/16 (equivalent to 90 per cent of set collection target) to Sh 523.56 billion in 2016/ (83 per cent of target). The Government under-disbursed capital grants to 167 local government authorities (LGAs) by 51 per cent in the 2016/17 financial year. The government also over-disbursed development grants to 14 LGAs and only 28 per cent of the budget allocated for development projects was spent by the LGAs during the financial year audited.

Moreover, the Government Auditor also revealed that 36 per cent of the capital grants that were received by 168 LGAs remained unspent. As a result, unspent funds increased from Sh197.61 billion in the 2015/16 financial year to Sh260.85 billion in 2016/17. Also, 60 projects valued at Sh782.47 million had been completed in 13 LGAs - but they were not put into effective use."

Giving her synopsis, Dr Annette Mummert from the German technical cooperation agency, GIZ, counselled that the country needs to think beyond efficiency gains in revenue collection and stressed that there is room to widen the tax base. She also advised the need to bridge information gaps with better information sharing between Tanzania Revenue Authority (TRA) and LGAs with the coordination of the President’s Office – Regional Administration of Local Government (PO-RALG).

She further emphasised that frequent changes in the legal framework increase uncertainty and undermines adaptation of administrative procedures which shrink revenue base of LGAs. Broadening of fees might not compensate for centralization of taxes but might increase the unpredictability of budgets for LGAs in view of the current unsatisfactory remittance of centrally-collected revenues and fiscal transfer practices by central government.

Dr Mummert also urged that effective collection of property taxes requires constructive working relations between the central government and the municipalities.

She observed, furthermore, that TRA has become a catalyst for improvements in collection methods at the local level by introducing new digital technologies. “The TRA has contributed to a drop in the degree to which local elites evade property taxes. However, in contrast to the municipal staff, TRA has limited knowledge about the local property tax base,” she said adding that the TRA is not well placed to connect property tax compliance with improved local services.

In June 2018, the government tabled the Finance Bill 2018/2019 that amended the LGAs (Rating) Act cap 289 section 3 by adding in its appropriate alphabetical order the following definition: “rating authority” means Tanzania Revenue Authority”. This amendment shifts power of collecting property tax from LGAs to TRA.

 

 

The 2018 Financial Secrecy Index, a tool for measuring global financial secrecy and secrecy jurisdictions, presents some worrying signs for the emerging economies in Africa and threaten to potentially undermine the sustainability of their development trajectory. Tanzania scored a high secrecy score of 73. Surprisingly, even with these attractive secrecy policies, it is only recently that the jurisdiction has been brought under the spotlight.

These findings were presented at the Policy Forum’s Monthly Breakfast Debate held on 25th May 2018 at the British Council Auditorium. The Deputy Executive Director of Tax Justice Network Africa (TJNA), Jason Rosario Braganza enlivened the debate with his presentation on “Financial Secrecy Index 2018: Is Tanzania Doing Enough to Fight Illicit Financial Flows?” constructed from the findings of the 2018 Financial Secrecy Index.

Elaborating on Illicit financial flows (IFFs), Braganza defined IFFs as the illegal movements of money or capital from one country to another. Global Financial Integrity (GFI) classifies this movement as an illicit flow when the funds are illegally earned, transferred, and/or utilized.

He further highlighted that Tanzania has a wealth of mineral resources. Gold represents approximately 90% of the mining production in Tanzania. However, the extractives industry has been marred by secrecy and corruption leading to scandals. Recently, Acacia Mining Plc, a London based company, was found to have been understating its tax liabilities in Tanzania. Committees formed in July of 2017 found widespread irregularities that led to contracts that were not beneficial to the country and resulted in a loss of government revenue. Tanzania’s development plan now strongly advocates for eradication of tax evasion and emphasises transparency. The mining industry has particularly found itself under scrutiny as the government seeks to overhaul the sector and increase its contribution to the GDP to 10% by 2025.

Kayobyo Majogoro an official from the Tanzania Revenue Authority endorsed that for the war against IFFs to take shape, there is a strong need to heighten efforts to combat corruption in Tanzania. He continued further by saying that there is a need to capacitate the institutions that deal with corruption and harmful tax incentives and urged Tanzanians to ensure that they are in accordance with the law when establishing their businesses, including being transparent on beneficial ownership to help curb illicit flows out of Tanzania.

Using the mining sector as an example, he said the TEITI Committee has put in place a roadmap to implement beneficial ownership disclosure, including establishing a materiality threshold of 1% stake for the disclosure of beneficial ownership and establishing a central registry to house information from extractive companies.

“Tanzania has made several efforts recently for instance curbing problematic mineral exports, auditing the largest mining companies in the country and changing law to allow the state to renegotiate contracts with extractive companies,” he said.

These steps, he said, will help improve policy recommendations aimed at enhancing the mobilization of domestic public resources in developing countries and to maximize the contribution of international development cooperation to sustainable developmental transformation and the achievement of the Sustainable Development Goals.

The Financial Secrecy Index (FSI) was created by the Tax Justice Network (TJN) in 2009 to identify and rank the scale of the contribution of global jurisdictions to individual and/or corporate tax avoidance and tax evasion, that was independent of the, potentially more politicised, OECD-IMF type rankings.

 

 

 

 

 

 

 

Preamble: For a country like Tanzania to meet its inclusive development objectives and realistically fund essential services such as provision of clean and safe water, healthcare, education and infrastructure, it needs reliable sources of own revenue including from taxes. Moreover, an economy needs a tax policy that redistributes wealth to address inequality including redressing gender gaps within society. To achieve all this through taxation, the revenue system should encourage an environment where businesses thrive and citizens flourish economically, and whereby the its administrative systems are transparent, accountable, fair and efficient.

We, the members of the Tanzania Tax Justice Coalition, a loose coalition of Civil Society Organizations interested in advocating for a reliable, just and transparent tax system in Tanzania, would like to share our views on the current trend in domestic revenue mobilization and suggest alternative options that could be adopted to reduce donor dependency through effective mobilization of domestic resources.

We boldly commend the fifth phase government’s drive to mobilize adequate financial resources domestically and welcome its forward-looking in this area with the President’s constant emphasis on taxpayer compliance. We agree that there is a strong commitment by the government to improve collection of domestic revenue and in turn make planning more realistic and meaningful.

To achieve this seemingly daunting but realistic ambition, the government has been emphatic in calling for the use of electronic fiscal devices for transactions to avoid leakages of revenue. It is important to note, however, that in some instances the recent enforcement of tax compliance has been overzealous, resulting in expressions of grievance from the business community. We encourage increased voluntary compliance through better taxpayer appreciation of the rationale for taxation, clarity and simplification of payment methods so as not to impact negatively on the business climate and confidence.

Issues to consider in the 2018/19 Budget

The national budget being proposed is the third under the Fifth Phase Government intending to finance the third year of the implementation of the Second Five Year Development Plan (FYDP II) which runs till 2020/21 putting emphasis on heavy investments in infrastructure to transform the country to an industry-based economy. Budget execution, however, continued to see sluggishness in the 2017/18 period as was the case in the previous financial year and revenue targets have fallen short. The development plan envisages growth driven by a vibrant private sector, but the business climate will need improvement if unemployment particularly of youth is to be tackled effectively.

Domestic Revenue

Based on revenue collection trends, the government’s budget for 2018/19 has slightly increased by 2% from TZS 31.7 trillion in 2017/18 to TZS 32.5 trillion in 2018/19. Out of the TZS 32.5 trillion intended to be collected during the financial year 2018/19, TZS 20.2 trillion (about 62%) is for recurrent expenditure while TZS 12.4 trillion (about 38%) is for development expenditure. Over TZS 10 trillion of the recurrent budget is intended to service the public debt which stands at TZS 47.8 trillion.

Of much interest in this upcoming national budget is the government intention to source over 60% of the overall budget locally. Domestic revenues are expected at TZS 22.1 trillion; with tax revenue, non-tax revenue and LGAs own sources contributing TZS 18.9 trillion, TZS 2.4 trillion and TZS 0.8 trillion, respectively.

Donor contribution in the 2018/19 budget is expected to be only TZS 3.7 trillion with grants taking TZS 0.9 trillion and TZS 2.2 trillion as concessional loans. Total contribution by donors is therefore expected at 12% of the total government’s budget, a commendable and bold move by the government manifesting the political will and commitment to reduce dependence in financing development.

It is irrefutable that both the number of taxpayers and tax revenues have significantly increased between 2015/2016 and 2018/2019 fiscal years. For instance, the increase between July 2015 and July 2016 was from 6.44 to 7.27 trillion equals to 12.7 percent. There was a significant increase in the per-month tax collection between 2015 and 2016. For instance, compared to August 2015, August 2016 had a 25. 01% increase. These trends have been partly associated with tax collection measures, which the fifth term government has been taking since its inception.

Apart from taking a stock of the taxpayers and their location, provision of tax education, and enhancing systems for tax records’ management; there have been notable changes in taxation rules some of which have raised some satisfaction among business operators. The groups that seem to be most affected by these changes include newly established businesses, especially the micro and small enterprises, that were recently mobilized to formalise. Many of these businesses are owned by women and youth whose start-up capital is mobilised from own, family, and short-term micro-financing sources.

‘Aggressive collection’ efforts

The recent efforts to improve tax administration for reduced compliance and facilitation of taxpayer education including raising awareness of their obligations and liabilities are well noted. Despite these, more still needs to be done to enhance cooperation of the taxpayer and improve the integrity of the tax collection system.

Anecdotes, analysts, and studies report frustrations associated with perceived unfair tax estimates, aggressive or heavy-handed tax collection practices and combative interactions between the taxpayers and Tanzania Revenue Authority (TRA) personnel that have resulted in the closure of businesses. For instance, the study by the Tanzania Private Sector Foundation (TPSF) found that 4,640 businesses were closed due to such reasons. In some of the areas such as Songwe and Makambako, many micro business operators are reported to have fled and are now operating businesses in neighbouring countries due to the fear of unaffordable tax burdens, severe tax-associated penalties and threats from tax and police officers.

This coalition advocates for a fairer tax system for all and therefore it is important to ensure that the existing taxation regime puts into account the negative impact of any approach that it uses and is proactive to adjusting accordingly. Registering new taxpayers must go together with retaining the existing ones.

It is also important to appreciate that when taxpayers challenge or question the TRA with regards to their estimates and practices, they are not only exercising their rights but are in the process furnishing important feedback to the authority on approach used and demanding justifications and explanations for decisions taken, which is important in understanding their tax obligations. It is crucial, therefore, that they are treated with the same esteem as all other taxpayers.

Check the disincentives to formalise and pay taxes

An expanded tax base is a critical pre-condition for economic growth and increasing government capacity to deliver better services but will do little without well-reasoned, fair and incentivising practices and an enabling environment, which has not always been forthcoming of late in Tanzania. The World Bank’s 2018 Doing Business report cites Tanzania as holding 137th place out of 190 nations and difficulty in paying taxes was mentioned as one of the major impediments.

For instance, the recent notice by the Higher Education Students Loans Board (HESBL) that students whose parents possess business licenses do not qualify for loans is likely to be suggestive to many Tanzanians with informal businesses that staving off formalisation is better as there are few or no incentives for doing so. These unprecedented decisions raise questions whether the environment motivates individuals to register and pay tax.

Summary of our key policy recommendations:

Enhance capacities: Continue to strengthen the institutional capacity of Tanzania Revenue Authority to collect taxes through the modernisation of its tax system through further improvement of the Integrated Domestic Revenue Administration System (IDRAS) and providing financial resources and technical support to the officers of TRA to implement their roles.

Enhance clarity, criteria and education of taxpayer’s obligations: The TRA should put in place clear rules and explain comprehensively the criteria for tax obligation assessment that should be able to consider factors such as type and size of business, years in business, performance, and the change in operating environment. The taxpayer should be able to access the information on their liabilities and the appeals procedures. Further, TRA together with other stakeholders should work together to support taxpayer assistance and educational programs (e.g. the use of Electronic Fiscal Device [EFD] for Small and Medium Enterprises).

Improve cooperative compliance: The TRA should appreciate taxpayers’ challenges on tax obligation assessments and practices as part of the democratic process, client feedback and social contract between government on one hand, and citizens and small enterprises on the other. Citizens and businesses are key allies for the current domestic resource mobilisation agenda and for sustained reforms in tax policy. In the context of limited financial resource to enforce compliance, the incentive for TRA is that mutual respect, trust and appreciation will help improve taxpayer conduct and attract new investments.

Improve overall business environment: Much more than simplification of the tax paying system is needed to improve the business climate. Business operators still lament the excessive permits and licenses that increase their cost of doing business and hence need to be discarded.

 

 

Preamble: The Policy Forum (PF) Budget Working Group welcomes yet another opportunity to share views regarding the performance of previous budgets and propose some recommendations that we believe are worth consideration during current parliamentary deliberations for the 2018/19 budget to be concluded late in June. Recommendations in this position statement have also been shared with respective parliamentary committees prior to their budgets being read in the Parliament and are hereby being shared with wider stakeholders to highlight areas that need concerted interventions in relation to the budget.

The national budget being proposed is the third under the Fifth Phase Government intending to finance the third year of the implementation of the Second Five Year Development Plan (FYDP II) which runs till 2020/21 putting emphasis on heavy investments in infrastructure to transform the country to an industry-based economy. Budget execution, however, continued to see sluggishness in the 2017/18 period as was the case in the previous financial year and revenue targets have fallen short. The development plan envisages growth driven by a vibrant private sector but the business climate will need improvement if unemployment particularly of youth is to be tackled effectively.

The agricultural sector continues to provide employment to more than 65.5% of adults Tanzanians and decision in the 2017/18 budget to eliminate around 80 diverse taxes viewed as nuisance should benefit smallholder farmers. Financial disbursements to education development projects have continued to remain below 50%, with a mismatch between planning and allocation for both recurrent and development expenditures affecting learning outcomes. The health budget allocation trend has not been in line with the Health Sector Strategic Plan IV (HSSP IV) and with the increasing demand based on population growth and disease burden. Budget implementation in this sector also notes a Human Resources for Health (HRH) deficit of about 50% in all cadres.

To this end, as active participants in the Tanzania budget processes including parliamentary consultations, we present this submission with a view of informing numerous policy choices that are critical to the country’s future.

Domestic Resource Mobilisation: Raising Revenue the business-friendly way

We commend the fifth phase government’s drive to mobilize adequate financial resources domestically and welcome its forward-looking in this area with the President’s constant emphasis on taxpayer compliance.

To achieve this seemingly tough but a realistic ambition, the government has been emphatic in calling for the use of electronic fiscal devices for transactions to avoid leakages of revenue. It is important to note, however, that in some instances the recent enforcement of tax compliance has been overzealous, resulting in expressions of grievance from the business community. We encourage increased voluntary compliance through better taxpayer appreciation of the rationale for taxation, clarity and simplification of payment methods so as not to impact negatively on the business climate and confidence.

Based on revenue collection trends and shrinking donor support, the government’s budget for 2018/19 has slightly increased by 2% from TZS 31.7 trillion in 2017/18 to TZS 32.5 trillion in 2018/19. Out of the TZS 32.5 trillion intended to be collected during the financial year 2018/19, TZS 20.2 trillion (about 62%) is for recurrent expenditure while TZS 12.4 trillion (about 38%) is for development expenditure. Over TZS 10 trillion of the recurrent budget is intended to service the public debt which stands at TZS 47.8 trillion.

Of much interest in this upcoming national budget is the government intention to source over 60% of the overall budget locally. Domestic revenues are expected at TZS 22.1 trillion; with tax revenue, non-tax revenue and LGAs own sources contributing TZS 18.9 trillion, TZS 2.4 trillion and TZS 0.8 trillion, respectively.

Donor contribution in the 2018/19 budget is expected to be only TZS 3.7 trillion with grants taking TZS 0.9 trillion and TZS 2.2 trillion as concessional loans. Total contribution by donors is therefore expected at 12% of the total government’s budget, a commendable and bold move by the government manifesting the political will and commitment to reduce dependence in financing development.

The Power of Youth: Skills Development in the 2018/2019 Budget

Strategically, youth should present an integral part of financing for development as they constitute a resourceful population with much potential to the economy. Evidence from the 2014 Integrated Labour Force Survey, however, reveals that more than 88% youth are unemployed due to among others, the inability of the educational and training system to produce appropriate skills for employability and self-employment and exclusion by the formal financial service sectors.

Informed by a joint research between the government and private sector, the 2018/19 Prime Minister’s budget speech indicated the need to provide employable skills to 79.9% of the total national workforce, which has very low skills. Both the allocations and disbursement of the funds for youth development in the past, however, raise questions on whether youth development is a priority of the government. For example, the allocation for the 2014/15 fiscal year was TZS 6 billion, but only TZS 2 billion was released. The allocation for the 2015/16 fiscal year went down to TZS 1.6 billion. With this disbursement, which was only 26% of the allocated funds, only 284 beneficiaries managed to access the funds up to the beginning of the 2016/17 budget cycle.

During the 2017/18 fiscal year, the number of youth who benefited from the National Youth Development Fund increased to 840, but with a substantial decrease in the amount of loans provided to youth from TZS 1.6 billion in the 2014/2015 financial year to TZS 783 million during the 2017/2018 fiscal year. While the National Youth Development Fund is striving to broaden its outreach and serve more youth, the actual trends suggest the need to allocate sufficient budgets with the aim of empowering youth to make the ongoing small industries development initiative youth-led.

In addition, local government authorities are mandatorily required to allocate funds for youth (and women) development for each fiscal year. During the 2016/17 fiscal year, the threshold was five percent of their internal budgets. During the 2017/18 fiscal year, the threshold was raised to ten percent of the LGAs’ internal budgets. The required contribution for the 2018/19 fiscal year remains ten percent of the total budget. However, this amount includes other groups such as women and the disabled while LGAs are expected to allocate only four percent of their total internal budgets for youth development projects. We agree that this requirement is crucial to making LGAs accountable for financing youth development. However, based on the previous trends, we foresee a limited possibility that LGAs will be able to allocate sufficient funds during the implementation mainly since LGAs’ own sources of revenues have become narrower compared to the previous fiscal years.

The increase of budgets for the strategic sectors which have a potential of contributing to youth development may address the key youth challenges including employment. For instance, the budget for the Ministry of Industry, Trade, and Investment increased from TZS 98.0 billion for 2017/18 to TZS 122.2 billion for the 2018/19 fiscal year. However, the increase reflected a decline of the development budget from TZS 75.3 billion to TZS 65.6 billion of the total budget, which may affect the expansion of the sector to create more employment for youth.

In addition, based on the implementation of the 2016/17 and 2017/18 budgets, experiences show that the gap between allocations and actual disbursement could affect aspirations of turning industry into a strategic sector for addressing youth unemployment. For instance, only 48% of the total budget for the 2016/17 fiscal year had been released by April 2017. The gap was wider for development budget where only 19% of the funds were made available.

We therefore urge the government to not only allocate sufficient resources for skills development but implement a long-term strategy for financing technical and vocational skills development, working with the private and voluntary sectors as close partners who may fill the gap left by insufficient financing. In addition, we call upon the government to treat provision of loans to youth who are willing to undertake technical and vocational skills development training as a priority.

Also, there is limited integration and coordination of youth development financing efforts by different ministries, which are responsible for youth development. The ministries of which the budgets are supposed to address youth development are the ones responsible for labour, employment, and youth; Technical Education and Vocational Training (TEVT), healthcare, local government, industry, and agricultural development. A good example is the budget speech for the Ministry of Education, Science, and Technology for 2018/19 which articulates technical and Vocational Education as strategic for skills development. However, the annual budget for education had only an increase of TZS 1 billion. We urge the government to establish mechanisms for harmonizing the youth development financing efforts of these ministries during the implementation of the 2018/2019 budget.

The Budget for Education: Ending the Crisis

We believe, with many in agreement, that the quality of our education in the past few years has been declining. Literacy and numeracy skills among primary school children are below expectations across all grades (UWEZO, 2017); with less than 20% of fourth graders in Tanzania being able to read a full sentence and less than 10% able to read a paragraph (World Bank Report, “Facing Forward; Schooling for Learning in Africa, 2018”). The World Bank Report further points on imbalanced deployment of teachers as being long standing, whereas teachers’ absenteeism has been reportedly left more than half of classes unattended. It has further been reported that most teachers lack the necessary academic and pedagogical skills to teach (World Bank SDI Report, 2016) with only one out of five teachers mastering the curriculum they teach. Students’ performance in final exams has also been poor with an average of 60% of candidates scoring division IV and Zero (NECTA results, 2017).

Challenges associated with quality aside, our education has encountered financial concerns such as poor planning, allocation and disbursement bringing discontent amongst stakeholders. For decades, the Government’s financial disbursements to education development projects has remained below 50% with mismatches between planning and allocation for both recurrent and development expenditures. We have witnessed inadequate capitation grants to schools, poor learning and teaching environment and shortage of qualified teaching staff among others that hamper the effectiveness of our education.

Our focus is on falling allocation trend of the education sector’s budget. According to the Ministry of Finance’s sectoral analysis 2017/18, the Parliament approved TZS 4,706.4 billion as the total education sector’s spending for the FY 2017/18. This is, in fact, 1.3% less than what the parliament had approved for the sector in the FY 2016/17 which amounted to TZS 4,770.4 billion. Thus, the education sector’s budget has dropped by TZS 64 billion.

While the drop of 1.3% (TZS 64 billion) from the budget may seem light, we submit that it has serious effect on the education budget. Because of that drop, the proportion of the education sector’s budget to the national budget has also fallen from 16% allocated in 2016/17 to 14.9% or approximately 15% in 2017/18. As a matter of fact, this falling trend has been continuous in the last five years. This allocation is not only meagre compared to the existing education sector’s demands, but it is also short of regional and international commitments to education such as the Dakar Framework for Action on Education for All, 2000 and the Incheon Declaration and Framework for Action, 2015. These frameworks recommend that countries in sub Saharan Africa allocate at least 20% of their national budget to education to address learning challenges and meet education demands.

Tanzania only attained 20% allocation benchmark in the 2008/09 period. The budget has, since, either been falling or stagnating below the recommended proportion. Due to the falling proportion the education sector has been denied a total of TZS 4,609.5 billion that was supposed to have been allocated had the government allocated 20% of the national budget to education in the last five years. Had this amount been allocated and disbursed, we would not be talking of 62% shortage of girls’ toilet facilities, or 56% shortage of toilet facilities for boys. We would not even be talking about a shortage of 186,008 staff houses (equivalent to 83.1 per cent); 10,943 administrative buildings (83.4 per cent) or 15.342 library rooms (88 per cent) or 16,290 first aid rooms (93.9 per cent) nor would we be talking of 41% of primary schools having shortage of infrastructure on average.

If the falling allocation trends continue unabated, its consequences on the learning outcomes, which are already dire, will certainly deepen. We should not allow our children and the future generation to continue bearing the costs of our poor planning today.

Health Budget 2018/19: Keeping up with the spending plan

An analysis by Sikika of the Ministry of Health Community Development, Gender, Elderly and Children (MOHCDGEC) budget for the financial year 2018/19 compares budgets for the past two years with the focus on the overall trend, development projects, health commodities and human resources for health. The following has been noted;

Budget allocation trend has not been in line with the Health Sector Strategic Plan IV (HSSP IV) and with the increasing demand based on population growth and disease burden. For FY 2018/19 has decreased by 20% while disbursement of the allocated budget has been below 50%.

While budget estimates for development projects for 2018/19 have decreased by 29%, contribution from development partners has decreased by 59%. Further, the local contribution has increased by about 12%. Despite the increase in internal resource allocation for development budget, the overall budget for development projects FY 2018/19 has decreased by 20% from previous year.

Furthermore, disbursement of the allocated budget has been low, foreign disbursement has significantly increased and the domestic disbursement has decreased. This calls for the government to significantly increase domestic allocation and disbursement to reduce dependence on foreign development partners.

For two years, budget for essential medicines, medical supplies and equipment has been increasing. However, the disbursement has been low. By February 2018, only 23% of the allocation had been disbursed while in 2016/17 disbursement was at 54%. Low disbursement affects critical areas such as maternal health services and safe blood. Availability of these commodities contribute significantly in reducing the maternal mortality which is still high. Further, the TZS 70 billion that was allocated to recover the MSD debt had not been disbursed. This is likely affect MSD’s operations and performance.

The budget implementation report notes a Human Resources for Health (HRH) deficit of about 50% in all cadres. Further, in 2016 the gap for specialists at the regional referral hospitals only was about 500 (RMOs’ presentation 2016, JAHSR). The newly established tertiary hospitals such as Mloganzila and Benjamini Mkapa might have further increased the demand for specialists.

Gender: Absent spending information and targets

The mainstreaming of crosscutting themes such as gender is crucial for the attainment of the national development plan. We believe, hence, that this should be more clearly articulated in government planning, budgeting and monitoring processes.

Last year, for instance, Policy Forum congratulated the government for the specific budget lines aimed at addressing the needs of several marginalized groups in the society like pregnant women, children and the disabled. In the 2018/19 financial year, however, we expect to see more commitment towards strategic integration of gender in the budget rather than simply relying on special budget lines to cater for special groups in society. For example, the Tanzania Gender Networking Programme (TGNP) notes that currently sex and gender disaggregation of the TZS 483 billion loan portfolio for higher learning students is lacking. Hence although it is known that an average 39.34% of the 69,539 higher learning students selected in 2017 were female, slightly favouring males, any additional resources directed towards higher education are likely to benefit the latter more.

We also saw other positive commitments that affect women, for instance in the elimination of around 80 diverse taxes, levies and cess out of 139 which were for the most part viewed as nuisance to small holder farmers. These taxes and levies were inclusive of those targeted at tobacco, coffee, sugar, cotton, cashew nuts, and tea. Moreover, taxes and levies on farming inputs such fertilizer, seeds, and packaging materials were similarly removed or intensely reduced. In this regard, it is anticipated that these measures have directly or indirectly benefitted smallholder farmers in Tanzania including women.

In the mining sector, it is estimated that that around 1 million Tanzanians are involved in Artisanal and Small-scale Mining (ASM), of whom approximately 25% are women. Women are found in salt making (38%), construction materials (32%), gold and diamonds (37%). Moreover, women also constitute around 10% of mining license holders, and 10% of the 12,000 employees in the extractive industries.

However, a gender pay gap averaging 31% confronts women in the extractive industries whereby they earn an average 69% of what men earn in the same activity. The gender pay gap is 10% above the national average. In addition, women are absent from the uppermost paying positions in ASM, especially in positions such as owner or operator. The government hence has not done more to address this imbalance nor been specific about what interventions would help women.

For example, the budget for 2017/18 targeted to allocate 11 mining areas, with more than 38,951 hectares to small miners but it did not explicitly state whether women, youths and other marginalized groups will be among the beneficiaries in this constellation. It also planned to provide subventions amounting to TZS 7.48 bn in its 3rd phase of the Sustainable Management of Mineral Resources Project (SMMRP). It is of obvious of interest that these subsidies benefit women, youth and other marginalized groups in an acceptable proportion.

Summary of our key policy recommendations:

1. Continue to strengthen the institutional capacity of Tanzania Revenue Authority in collecting taxes through modernization of its tax system, providing financial resources and technical support to the officers of TRA to implement their roles. Further, TRA together with the Government and other stakeholders should work together to establish and support taxpayer assistance and educational programs (the use of Electronic Fiscal Device [EFD] for the SMEs).

2. Widen the tax base by putting in place more improved and less stringent methods to tax the informal sector. This among others, may involve implementing the Integrated Domestic Revenue Administration System (IDRAS).

3. Allocate sufficient resources for skills development for youth and put in place mechanisms to implement a comprehensive long-term strategy for financing technical and vocational skills development, working with the private and voluntary sectors as close partners who may fill the gap left by insufficient financing. Treat provision of loans to youth willing to undertake technical and vocational skills development training as a priority.

4. Need for mainstreaming and coordination of youth development financing efforts by different ministries, which are responsible for youth development for instance supporting efforts to increase the participation of youth in agriculture.

5. Call for increased allocation trend of the education sector’s budget especially development budget including the sector’s development budget disbursement challenges being addressed.

6. Deliberate efforts and strategies are needed to ensure sufficient investment in health in terms of planning, allocation, disbursement and efficient execution of resources.

7. Address HRH shortage through proper employment and retention mechanisms especially for specialist at Regional and Tertiary hospitals.

8. Government should initiate and capture in better detail all the specific barriers and capacity gaps for women’s economic engagement in the value chains of the agricultural sector and the gas, minerals and energy sub-sectors. It is obvious that a disaggregation by age, sex or gender would reveal even more about the disadvantaged like women, youth and other marginalized groups.

https://www.policyforum-tz.org/sites/default/files/POLICY%20FORUM.pdf

The Executive Director of Kepa, a Finnish NGO network, Timo Lappalainen (left) and Communications Officer Mirka Kartano (first right) with Policy Forum Coordinator, Semkae Kilonzo (second left) and Kepa Tanzania Country Director, Bakar Khamis Bakar (second right). The Kepa mission visited Tanzania this week to meet with partners for the closing down of Kepa's operations in the South and to celebrate their organisation's achievement for the past 20+ years working in Tanzania including in areas such as mitigation of climate change, prevention of tax avoidance, and promoting corporate responsibility. A press release of the decision is available here:  https://www.kepa.fi/uutiset-media/tiedotteet/budget-cuts-reduce-ngo-platform-kepas-activities-again

Policy Forum thanks its member organisation Kepa for its support over the years and wishes their staff all the best in their future endeavours.

The recently released 2016/17 Controller & Auditor General Report has revealed a number of challenges relating to effective financial accountability at the local level including under and over-disbursements, massive amounts of unspent funds by local government authorities, drop in revenue collections and ineffective use of spent monies.

This was observed from a presentation made by Yona Killagane from Wajibu Institute of Public Accountability (WIPA) on the Policy Forum’s Monthly Breakfast Debate. The debate focused on 2016/17 CAG's report: What are the Trends of Financial Accountability in Tanzania?

Presenting the observations, Killagane said that the Government under-disbursed capital grants to 167 local government authorities (LGAs) by 51 per cent in the 2016/17 financial year. The government also over-disbursed development grants to 14   LGAs and only 28 per cent of the budget allocated for development projects was spent by the LGAs during the financial year audited. He added that the Government Auditor also revealed that 36 per cent of the capital grants that were received by 168 LGAs remained unspent. As a result, unspent funds increased from Sh197.61 billion in the 2015/16 financial year to Sh260.85 billion in 2016/17. Also, 60 projects valued at Sh782.47 million had been completed in 13 LGAs - but they were not put into effective use."

He further elaborated that the CAG's report also showed that LGAs' revenue collections dropped from Sh628 billion in 2015/16 (equivalent to 90 per cent of set collection target) to Sh523.56 billion in 2016/ (83 per cent of target).

He continued by highlighting that the fall in revenue collections have been contributed by the transfer of some LGA revenue sources to the Central Government - including property tax and billboard fees - as well as the abolition of some taxes at the local government level, such as crop levies.

He further recommended that due to the importance of Integrated Financial Management System (EPICOR) in strengthening financial accountability there is a need of the Government to invest in continuous training to officials on how to effectively use the platform and to create its champions who will support its implementation.

For the Government to be fully International Public Sector Accountability Standards (IPSAS) compliant, modules covered in EPICOR as proposed by the CAG should be implemented immediately including those relating to receivables, payables, inventory and linked with debt management and revenue collection for LGAs.

Following the audit queries that were raised and how they had been addressed, he endorsed the idea that duty-bearers should be  strongly urged to adhere to the legal procedure as stipulated in the Public Audit Act no. 11 of 2008 and its regulations in responding to audit queries.

Dr. Richard Mbunda from University of Dar es Salaam highlighted that the Controller Auditor General has limited access to information relating to oil, gas and mining companies operational as the principal Petroleum and Mining Acts do not grant him explicit mandate and power to access information relating to the production and sale of these natural resources. He suggested that because minerals are public assets, there is an urgent need for the Controller Auditor General (CAG) to have full access to audit this public resource.

The Former Controller and Auditor General, Ludovick Utouh remarked that Parliamentary Oversight committees: Public Accounts Committee(PAC), Local Authority Accounts Committee (LAAC) and Parliamentary Investment Committee (PIC) should be supported materially and financially to cover more auditees including continuously following ups on their implementation of the auditor’s recommendations.

Findings of the 2017 survey conducted by the International Budget Partnership (IBP) reveals that Tanzania has scored a lowly 10 out of 100, implying it is a country that provides scant or no information on public budgets. IBP considers countries that score above 60 on the Open Budget Index as providing sufficient budget information to enable the public to engage in budget discussions in an informed manner. Countries scoring above 60 on participation and oversight are deemed as providing adequ ate opportunities for the public to participate in the budget process and providing adequate oversight practices.

Presenting at the morning debate coordinated by Policy Forum (PF) on the theme ‘Open Budget Survey 2017: What is the State of Fiscal Transparency, Participation and Budget Oversight?’, Boniventura Godfrey, the Head of Programs at HakiElimu, explained that the survey gauges three pillars of public budget accountability: transparency, public participation and oversight.

On transparency, the indicators assessed whether the central government makes eight key budget documents (pre-budget statement, executive’s budget proposal, enacted budget, citizens budget, in-year reports, mid-year review, year-end report and audit report) available to the public online in a timely manner and whether these documents present budget information in a comprehensive and useful way.

Explaining the availability of the budget documents to the public, Godfrey claimed that since 2008 Tanzania government has not made enough effort to produce mid-year review and year-end reports. With regards to the citizens budget, the executive budget proposal and in-year reports, in 2017 the government published late, or did not publish online, or produced for internal use only and that has remarkably affected score of budget transparency (10/100). The score is affected by the fact that the survey recognizes budget documents as publicly available if they are published online on the relevant government institution’s website.

As for Public Participation, Tanzania has scored 15 out of 100 which is slightly above the global average which is 12. Godfrey explained that the  public participation indicators measure the degree to which the government provides opportunities for the public to engage in budget processes. Such opportunities should be provided throughout the budget cycle by the executive, the legislature, and the supreme audit institution.

Godfrey elaborated that the aspect of Budget Oversight measured the strength of two oversight institutions which are the Supreme Audit Institution (SAI), in the Tanzania case the Controller and Auditor General (CAG), and the Legislature. The legislature oversight aspect produced a score of 37 out of 100 in 2017 while in 2015 it scored 39 out of 100. Major reasons for the fall includes the legislature committee not examining or publishing reports on in-year implementation, the legislature not being consulted before the government shifts funds and lack of legislative hearings for the public/civil societies to testify.

The oversight by Supreme Audit aspect produced a score of 39 out of 100 in 2017 compared to 50 out of 100 in 2015. Key issues highlighted by the survey includes the fact that head of SAI is not appointed by the legislature, audit processes are not reviewed by an independent agency, lack of formal mechanisms for the public to assist the SAI in formulating its audit program and the lack of space for public to participate in relevant audit investigations.

Godfrey recommended that the government produce and publish online Mid-Year Reports, Year-End Report and In-Year reports in a timely manner. Also, he counseled for the publishing and increasing the comprehensiveness of the Executive’s Budget Proposal. He further stressed that there should be an established accessible mechanism for capturing public perspectives on the budget discourse as well as formal mechanisms for the public to participate in audit investigations.

Discussing the topic Hon. Zitto Kabwe (MP) pointed that “Tanzania’s drop of score from 46 in 2015 to 10 in 2017 is a sign that the executive did not care even under pressure” and that the country faced a serious problem of budget credibility. “The parliament usually passes the budget but the executive has the power to decide what to implement and what not to. For the nation to realize its development potential, the parliament is supposed to approve all major development projects to limit the misuse of public money,” he added.

Hon. Kabwe urged citizens to participate in the meetings held at the grassroots to discuss with local leaders the issues relating to development and not wait for avenues to criticize what is done by the top executives. He also advised PF to seek an opportunity with the Parliamentary Standing Committee on Budget to present the findings and recommendations to improve transparency, participation and oversight of the budget.

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