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Sat May 18, 2013

How importers evade tax through illegal ports


The Tanzania Revenue Authority (TRA) yesterday issued a strong warning to owners of sea vessels, vehicles  and residents living  along the Indian Ocean coastline -- against tax evasion done some business who import various types of commodities through the shores.

According to the warning, the coastline through which importation of commodities through clandestine means are smuggled  stretch from Dar es Salaam to Bagamoyo. Hot spots  identified  by the revenue authority  as being highly preferred  by tax evaders are  Kawe, Mbweni, Mlingotini , Ununio, Msasani, Kunduchi and Kigamboni.

Acting TRA Commissioner for the Department of Import tax and excise duty Tiagi Masamaki has said TRA would now wage an unwavering war against such a clandestine business along the stretch as it denies the government its revenue, jeopardizes health of commodity consumers and creates unfair environment for business competition .

The war against tax evaders has come at time when TRA unveils its fourth Five-Year Corporate Plan running from 2013/2014-2017/2018 under which the body is expected to raise its revenue collection from the current  Sh9.5 trillion to Shs 18.8 trillion, equivalent to an increase of 98 per cent.
 
Commodities imported through such points are cooking oil, infant formula milk, especially NIDO , dry cell torch, rice, sugar and cloths.  The revenue body now says all vessels and  vehicles used in smuggling of commodities would be nationalized after being impounded.
 
The smuggled consignment, according to Acting Commissioner Masamaki, would not be spared as it would also be nationalized.  He has also announced that a generous award would be awarded to any whistleblower who would divulge information to authorities about the illegally imported commodities.

Reports state that traders who import commodities from Tanzania boarders have been ordering vessels, including ships to dock in deep waters in the Indian Ocean in the middle of the night before  dispatching boats, dhows  and canoes to bring the commodities to the shores where they are loaded onto trucks and pick-ups. The same strategy is normally used by traders in Zanzibar.

In its cooperate plan document signed by revenue body’s Commissioner Harry Kitillya TRA states that the  overall revenue collections should  increase significantly in order to reduce donor dependency as most of the development partner countries are experiencing financial crises in their own countries which reduces their contribution to budgets of developing countries.

“ Therefore, there is an utmost need for the Government to be more self-reliant by increasing domestic revenue mobilisation to reduce aid dependency,,” TRA’s document of the corporate plan reads in part. 

TRA’s efforts to increase revenue has come amid persistent calls  from various stakeholders, pressing for increased revenue collections by widening the tax base. Recently, Kisesa Mp on CCM ticket issued a document in Dodoma that showed that the government was losing a whooping Sh 2.8 trillion annually from various sectors.

He named the sectors as  telecommunication, fishing, forestry and mining  and informal sectors.  

Giving the breakdown Mpina said various researches conducted by a number of institutions in and outside the country showed the country was losing Sh525 billion in revenue from the mining sector annually through tax evasion.
 
He said in the telecommunication industry the government loses a whopping Sh600 billion through the same manner while Sh362 billion is lost in fishing industry.
 
Informal sector, according to Mpina, was leading  as data showed the government was losing Sh 1.3 trillion annually.

But, Controller and Auditor General ( CAG) Utouh in his   2011/2012 financial audit reports of the government expenditures offered several strategies  to widen tax base and enhance government revenue, including imposing tax on mobile phone money transfer business( M-Pesa, TigoPesa,Airtel Money ect) . 
 
He also asked the  government to target informal sector by taxing petty businesses, medium and large scale farmers, small scale minors and social halls’ owners.
 
Following the introduction of National Identity cards Utouh says there should be a link between the IDs and tax registration, including raising public awareness on the importance of paying tax.
 
He also suggested to the government to conduct aggressive market research to identify the location and market value of the houses and introduce individual tax returns by having a requirement to disclose rent paid by individuals.  
 
According to the CAG’s report, the government should revisit its decision to grant tax exemptions in various areas with the view of establishing their importance to the economy and abolish all exemptions which seem to have negative effect to the revenue collection. In 2011/2012 the exemptions granted reached 1.8 trillion.

 
TRA now says  the attention shall be on enhancing domestic revenue collection bearing in mind that with the regional groupings, contribution from international trade taxes will keep on declining hence the  contribution from domestic taxes is expected to increase from the current 62 per cent to 70 per cent  by June 2018.

According to TRA the  process for preparation of the Fourth Corporate Plan has taken a bottom up highly participatory approach, involving sessions with TRA District Managers, Assistant Regional Managers and Regional Managers at the initial stage. 

The process  was followed by sessions with Headquarter Managers, Deputies and Heads of Department, Board of Directors with subsequent input from Development Partners and TRA stakeholders. 

The objective of the sessions was to brainstorm on the implementation challenges and achievements of the Third Corporate Plan and design strategies for the Fourth Corporate Plan. 

Recounting on the success recorded in the Third Corporate plan Kitillya  said  TRA managed to significantly increase revenue from a monthly average of Sh 338 billion 2008/09 to an estimated monthly average of Sh 669 billion in 2012/13. 

 

SOURCE: The Guardian

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Posted by Protas Onesmo

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