The committee faced a challenging task in reviewing Tanzania’s tax regime

One of the most significant challenges that Tanzania’s recently established Tax Reforms Commission will face is the resolution of complaints regarding tax administration’s deficiencies and malpractices. These issues reached a culmination approximately four months ago when domestic and foreign investors approached the government, demanding action.

The nine-member team has only recently commenced its work, having been officially inaugurated on October 4, a considerable amount of time after President Samia Suluhu Hassan appointed it on July 31. Consequently, it may encounter additional challenges as a result of recent developments.

Newcomers who are still settling in have since replaced several key government officials who were involved in talks with local traders over constant conflicts with the taxman and who the investors had specifically requested to be present at the roundtable through diplomats in Tanzania.

The commission’s mandate encompasses a comprehensive review of the country’s taxation regime, as well as the conduct of new assessments of disparities in rates imposed by the Tanzania Revenue Authority (TRA) on taxpayers at all levels, fines for non-compliance, and transparent matters related to the TRA’s collection system.

The primary objective is to achieve a harmonious equilibrium between the interests of taxpayers and tax collectors in accordance with current laws, while simultaneously preserving the business and investor-friendly environment that the Samia administration has diligently endeavored to restore following a period of stringent restrictions under her predecessor, John Magufuli.

The task force, which will be led by former State House chief secretary Ombeni Sefue, will also include former central bank governor Prof Florens Luoga, former chief government auditor Prof Mussa Assad, and former TRA commissioner-general Rished Bade.

Leonard Mususa, Aboubakar Mohamed, Mwanaidi Sinare Maajar, David Tarimo, and Maimuna Kibenga are additional members who are recruited from the private sector.

The team has not yet been given a deadline to complete its assignment and submit a report.

The commission was established in response to the increasing dissatisfaction with questionable taxation practices that emerged in mid-June. Traders at Kariakoo in Dar es Salaam and other major urban markets went on strike for several days to protest the harassment by TRA compliance inspectors, which they attributed to the perceived lack of transparency.

The government was compelled to momentarily alleviate tensions by engaging in a series of persuasive discussions with traders’ representatives in the administrative capital of Dodoma, as the go-slow occurred at a particularly detrimental time for the ruling establishment, with elections imminent.

Approximately at the same time, on June 26, ambassadors and high commissioners from ten countries based in Tanzania wrote to the then Foreign Affairs minister, January Makamba, requesting a formal meeting with relevant high-level government officials to resolve similar investor grievances over TRA’s conduct.

TRA’s rejection of tax concession agreements with the Tanzania Investment Centre — another state agency — on the basis that they had not been gazetted, extraordinary tax bills not supported by law, and “unevidenced” tax notices demanding payments and account reconciliations dating back 15 years were among the items cited in the envoys’ letter.

The petition was signed by envoys from the United States, Canada, Britain, Ireland, Germany, France, Belgium, the Netherlands, Sweden, and South Korea.

They cited investors’ allegations that TRA agents were directly menacing them with actions such as “freezing or seizure of their assets and bank accounts without notification nor timely legal recourse” if they protested or appealed.

Alphayo Kidata and Ashatu Kijaji, who were respectively the TRA commissioner-general and minister of industries and commerce, were among the officials whose attendance they believed would be crucial.

Mr. Makamba responded promptly, promising to organize the roundtable to resolve the issues that were brought to his attention. But shortly thereafter, he, Mr. Kidata, and Dr. Kijaji were dismissed from their positions, which prompted speculation in certain circles that one of the underlying objectives may have been to officially cancel the meeting prior to its convening.

The new seat officials, Mahmoud Thabit Kombo (Foreign Minister), Yusuph Mwenda (TRA head), and Selemani Jafo (Industries and Trade minister), are still transitioning into their new positions.

The Sefue commission will also be operating in the context of the recent quarterly record figures released by the Tax Administration (TRA). These figures suggest that the agency exceeded its tax collection objective for the period of July to September, collecting Tsh7.79 trillion ($2.88 billion).

Mr. Mwenda stated in the statement published on October 1 that the new figures had surpassed the annual Q1 revenue collection targets for the first time ever. He also asserted that the increase was “partly due to improved tax compliance and effective tax administration.”

In order to finance 67.4 percent of its Tsh49.35 trillion ($18.98 billion) expenditure plan through domestic financing, the 2024/2025 budget has allocated a total collection target of Tsh29.41 trillion ($11.31 billion) to TRA.

The total anticipated collections are comprised of 60-70 percent of large taxpayers, including multinational investors.