Tanzania is losing billions of shillings annually due to tax dodging and capital flight by wealthy individuals, profits laundering by companies and to untaxed activities in the grey economy, The Citizen has learnt. Experts say the government’s otherwise well-intended tax incentive regime has availed to multinational companies like banks, mining, brewing and telecom firms, loopholes for engaging in illicit capital flow, denying the Treasury a substantial chunk of revenue.They said the money was enough to finance several key development projects such as infrastructure as well as delivery of basic social services.
However, efforts to get comments from the government in the last two weeks were unsuccessful.Speaking at a policy forum’s breakfast debate on “Tax and Development and Capital Flight” late last week, the executive director of Agenda Participation 2000, Mr Moses Kulaba, said that fuelled by the flawed tax regime, the country’s wealth was swindled immensely through illicit financial flows.
“Due to poor tax regime, we are seeing an increasing trend of multinational companies that carry transactions through tax havens solely to avoid tax, with little or no basis in the country where they operate,” he said.Tanzania’s tax incentive regime is characterised by both fiscal and non-fiscal incentives as elaborated in the Tanzania Investment Act 1997 and the Zanzibar Investment Act 2004 and supported by specific Acts like the Mining Act, the Wildlife Act and Hotels Act.
The fiscal incentives include VAT exemptions on deemed capital goods. However, in addition to more recently enacted incentives, Mr Kulaba said, the revenue lost in 2009/10 was estimated at Sh695 billion, equivalent to the health sector budget in the same period.
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