It's high time government stopped this massive revenue 'bleeding'

BY EDITOR

28th April 2013

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Yesterday, our sister paper, the Guardian, published a lead story headlined, “How government loses trillions yearly”, in which we are told that the government loses about Sh2.780 trillion every year.

This is a shocking and appalling revelation considering that currently our government is cash-strapped and survives on borrowing bordering on a syndrome for some years now in order to finance its current and recurrent operation.

How often do our leaders fly outside the country with a begging bowl? But where do we get the audacity to beg donors to dole out aid if we cannot collect the Sh2.780 trillion ($1.684 billion), which the government deserves.

Tanesco has been struggling unsuccessfully to borrow just Sh408 billion to end the power crisis since October 2011. Till today, the state owned power utility has yet to secure the loans. IN the midst of this struggle, the government, we are told loses seven times what Tanesco needs to end the electricity problem. 

Speaking in Dodoma on Thursday evening shortly after the Parliament rejected the Sh398 billion budgeted for the Ministry of Water, Kisesa legislator ( CCM) Luhaga Mpina said the government was losing a whopping Sh2.870 trillion annually due to its failure to collect revenue from various sectors.

Giving a breakdown, Mpina said various studies by a number of institutions within and outside the country had demonstrated that Tanzania loses an annual Sh525 billion in revenue through tax evasion within the mining sector alone.

Within the telecommunication industry, he said the government loses a whopping Sh600 billion through tax evasions as well, as it does in the fishing industry where some Sh362 slips through ‘white-collar’ thieving hands. The informal sector has meanwhile broken the record, where data shows the government loses Sh 1.3 trillion annually. Such a financial trend is worrisome considering the fact that Controller and Auditor General ( CAG) Ludovick Utouh just a week ago released various government audited financial reports for 2011/2012 year in which it was revealed that the government in the respective financial year lost Sh789.883 billion overall through tax exemptions – which could have facilitated finance a five-year water development plan implemented under the Big Result Now ( BRN) initiative that calls for an annual allocation of Sh500 billion.

When Benjamin Mkapa, a man credited for tax collections, took over the presidency in November 1995, the government was almost bankrupt. There was no money. There was a time when the government borrowed money from traders --instead of taxing them -- in order to finance its operations.

While the government’s actual revenue collections were pegged at Sh75 billion monthly ($150 million according to exchange rate at that period), it only collected Sh25 billion. Mkapa made a firm decision to collect taxes, first, by establishing what we now call the Tanzania Revenues Authority (TRA) and, then, within three years, he introduced Value Added Tax (VAT). Just within six months in office, Tanzania’s monthly tax collections doubled.

Even when some of Mkapa’s key cabinet ministers were being accused of granting massive tax exemptions, he didn’t shield them; they were forced to resign by the Parliament, whose majority members were and are still from the ruling party. By the time Mkapa left the presidency in December, 2005, he left behind a legacy of boosting government’s revenues through tax collections.

We strongly believe that President Kikwete should also follow the same path by tightening all loose ends that deny government trillions of shillings. His government should also abolish unjustifiable tax exemptions. Why should the government grant a tax exemption to its employees who import Porsche or Range Rover Vogue or Mercedes Benz? Is that Porsche going to create jobs or add value to the country’s economy?

Tax exemptions are for investments which stand to benefit the nation economically in the long-run. The truth is neither Mercedes Benz S500 nor Porsche Cayenne is an investment project that can benefit the nation; these are mere luxury products and whoever needs them should be willing to pay heavy taxes.

At the same time, the government should also take austerity measures by reducing its spending spree. It doesn’t make sense if taxpayers pay taxes, which end up being used to finance fuel guzzlers, allowances and unjustifiable trips. 

SOURCE: GUARDIAN ON SUNDAY