The Tanzania Revenue Authority (TRA)’s impressive quarter one performance paints an encouraging picture to investors and businesses of the country’s economy and the achievement of its development targets. On October 3, 2023, TRA issued a public notice that it had collected over Sh6.58 trillion in the period of three months from July to September 2023, equivalent to 97.53 percent of the target set for that quarter.
According to TRA, the target was to collect Sh6.75 trillion during the period which is the first quarter of the government fiscal year.
Though this collection was slightly below the target, it was nonetheless 11.05 percent higher than the Sh5.92 trillion that was collected during the same quarter in the previous fiscal year. It was revealed that on September 2023 alone TRA was able to exceed its target at 108.4 percent after collecting Sh2.63 trillion, while the target was at Sh2.42 trillion.
TRA’s commissioner Mr. Alphayo Kidata said there is a range of factors behind these numbers such as the economic prosperity of the country, increased awareness, and compliance. “The increased use of information technology systems in tax management has simplified service delivery and improved the rate of tax compliance,” he stated in a public-issued notice.
The trend of TRA tax collection has been on a positive note. Looking back at the entire 2022/2023 fiscal year, TRA managed to collect Sh24.11 trillion in tax revenue, equivalent to 97.4 percent of its target. While the authority fell short of its Sh24.76 trillion annual target by a narrow margin of 2.6 percent, this achievement is considered a huge success.
Before that in December 2022, the authority achieved a huge milestone after setting a record with the highest monthly collections recorded since the authority was established in 1966. The collection was at Sh2.77 trillion, and above the target of Sh2.6 trillion by 106.5 percent.
TRA continued to attribute the impressive performance to the rising willingness among the public to pay taxes; improved relations between the authority and taxpayers; timely resolution of issues, and the current growth of business and economic activities in the country.
For businesses and investors in Tanzania, these developments hold significant implications. TRA’s strong performance not only indicates a healthier fiscal environment but also suggests that the government is actively working to strengthen its revenue collection efforts.
Mr. Kidata said that the improved environment had been spearheaded by, “…the growth and huge investments to the economic activities in the country such as industrial manufacturing, importation and the recovery of tourism sector.”
For investors eyeing Tanzania, TRA’s strong fiscal performance can also signal a stable and potentially lucrative investment environment. That is evidenced by the improved industrial production data as provided by the Bank of Tanzania (BoT).
In its Consolidated Zonal Economic Report for June 2023, the central bank indicated that the value of selected manufactured commodities was Sh13.74 trillion in 2022/23, which was 8.6 percent higher than the amount recorded in the preceding year. “The improved industrial production was also attributed to conducive investment environment and increase in capacity utilization by some manufacturing firms including ceramic factories in Coast region,” the BoT stated in part.
Businesspeople and manufacturers also associated this performance with supportive Government policies and growing demand from domestic and regional markets like Burundi, Rwanda, the Democratic Republic of Congo, Comoros, Malawi, and Mozambique.
How tax collection will improve Budget Implementation
Robust revenue collection suggests that the government has the resources to invest in infrastructure and public services, which can benefit businesses through improved logistics and a more skilled workforce. The country’s budget for the 2023/2024 fiscal year proposed at Sh44.39 trillion includes strategies to increase the revenue collections during the year and improve investment and business environment.
As read by the Finance Minister DrMwiguluNchemba to the national assembly through this budget the government also aims to widen the tax base, strengthen and encourage the use of ICT systems as well as to continue to raise public awareness to encourage investment and strengthening cooperation with Development Partners. This is to make possible all the development plans spearheaded by key strategic projects set by the government to be achieved thoroughly.
These strategic projects include the energy and infrastructure sector sector like the construction of the Julius Nyerere Hydropower Project, Standard Gauge Railway, strengthening Air Tanzania Company Ltd, and the construction of the Crude Oil Pipeline Project The East African Crude Oil Pipeline (EACOP) Project from Hoima (Uganda) to Chongoleani, Tanga (Tanzania), and the Busisi bridge in Mwanza just to mention a few.
The implementation of these plans will depend on the effectiveness of the taxation systems.
Speaking in August 2023 Vice President Philip Mpango expressed confidence that so far the domestic budget financing is going well. As reported by the local newspaper The Citizen during the opening of the 8th African Tax Research Network (ATRN) he revealed that Tanzania can now finance its budget by around 70 percent. He said this was facilitated by the transformative tax reforms, the rise of voluntary compliance, awareness campaigns, and the efforts dedicated to addressing some of the global and regional contemporary tax issues.
The VP was quoted saying, “Systems developed so far include Tanzania Customs Integrated System (TANCIS), Electronic Fiscal Devices (EFDs) to monitor sales, ease record keeping for businesses, make tax assessments realistic and fair while at the same time enabling tax refunds for the VAT to be done within the prescribed period, Revenue Gateway System (RGS) and the Government Electronic Payment Gateway (GePG) to ease tax payment,”
He added, “Electronic Tax Stamps (ETS) to monitor and account for production and importation of excisable goods, Electronic Filing (e-filling) for our major income and consumption taxes, and the online registration for the Tax Identification Number (TIN).”
According to him, in resolving the complexity of taxing the informal sector which accounts for nearly 70 percent of the economy, they have implemented the Presumptive Taxation Regime, with tax brackets that commensurate with business size, zero (0) tax rate for micro traders and additional tax brackets as traders grow.
This all paints an encouraging picture of the Tanzania economy and the development road ahead.