Dar es Salaam: The government loses US$573.2 million (Tsh.900 billion) due to tax exemptions per annum, an official has said. In the fiscal year 2010/2011 alone tax exemptions worth Tsh900 billion (US$573.2 million), which is 2.9% of the national GDP was offered to various investors.
The Tanzania Revenue Authority (TRA), Commissioner General, Mr. Harry Kitilya, told the Parliamentary Public Accounts Committee (PAC) that such losses in tax exemptions were huge compared to other East African countries. "Tanzania needs to revise the tax exemptions in order to be in line with the National GDP," Kitilya said.
Members of the PAC concurred with Kitilya saying there was evidence that tax exemptions were not beneficial to the national economy. Mr. Abdul Marombwa, a committee member, said the idea of having tax exemptions is to promote growth of economic sectors and create employment opportunities, a thing which does not exist under the current tax exemptions.
Commenting on Kitilya's note that the government has so far not made any evaluation to find out the beneficiaries of tax exemptions to the economy, the Deputy PS of Finance, Mr. Laston Msongole, said despite the weakness in the government, tax exemptions have played a great role in promoting industrial growth.
"Tax exemptions are everywhere in the world because they have helped to activate the economy. The current standard of 2.9% has decreased from 4% for many years, something that indicates that we are doing better," he said.
Mr. Msongole mentioned the case of Kagera Sugar factory that is located in the lake zone region of Tanzania among industries exempted from taxes. He said the factory has been able to survive due to tax exemptions and this gave the investor the morale to revamp the factory to the current status.
Dr Haji Semboja of the University of Dar es Salaam (UDSM), said that tax exemptions created loopholes that were draining billions from government revenues, especially on imported fuel for mining companies. He said in the early 90's, the government and mining companies signed an agreement (separate from the mining contracts) that allowed mining companies to import fuel for their operations without paying taxes.
According to the don, the parties were forced to reach such an agreement because at that time there was lack of power in mining sites in the country and the price of fuel was very high on the world market while gold prices were low. The don insisted that there is no more justification for tax exemptions considering the current price of gold which is stable while all mining sites are connected to the national power grid.