Stakeholders suggest reforms to drive development

TANZANIA: STAKEHOLDERS have really useful tax exemptions on good units, noting that elevated utilization would have a optimistic impression on the nation’s financial system.

The authorities goals to attach all wards to the National ICT Broadband Backbone (NICTBB) by 2026, and these exemptions are seen as a key measure to assist digital inclusion and develop entry to the digital financial system.

The digital connectivity turns into more and more important for financial growth, charging Value Added Tax (VAT) of 18 per cent for residents to have entry to reasonably priced good units.

Tax exemptions on these units would scale back obstacles to entry, particularly in underserved areas and empower people and companies to take part within the digital financial system.

The digital connectivity turns into more and more important for financial growth, charging Value Added Tax (VAT) of 18 per cent for residents to have entry to reasonably priced good units.

Tax exemptions on these units would scale back obstacles to entry, particularly in underserved areas and empower people and companies to take part within the digital financial system.

Additionally, in line with Tanzania Mobile Network Operators Association (TAMNOA), the broader adoption of good units would improve entry to instructional sources, enhance healthcare supply and facilitate e-commerce, in the end contributing to the nation’s total development and growth.

TAMNOA member, Mr Francis Temba, mentioned that the exemption can even make the broadband infrastructure building extra significant and speed up its impression.

“Broadband coverage currently reaches 88 per cent for 3G and 80 per cent for 4G of the population, thanks to investments made by members of TAMNOA and the government, through UCSAF, to ensure broadband access is available everywhere,” Mr Temba, who can be the YAS Tanzania Head of Tax, mentioned: “The problem is that while we have been successful in ensuring broadband facilities are available everywhere, we have not been successful in bridging the usage gap.”

TAMNOA mentioned that if good units are granted an exemption for a sustained interval longer than 12 months, as was the case earlier than in 2019, it may result in a rise in information assortment from utilization. This, in flip, might have vital financial implications, together with development within the datadriven financial system and elevated tax revenues generated by way of digital units, whereas additionally serving to to curb tax avoidance.

The affiliation just lately offered its tax views earlier than the Presidential Commission on Tax Reform, chaired by Amb Ombeni Sefue, in Dar es Salaam. The fee has been given six months to suggest reforms geared toward overhauling the nation’s tax construction and improve its contribution to GDP.

The fee’s predominant process is to handle the continued tax challenges and improve the nation’s tax system to foster a extra conducive enterprise atmosphere.

The fee will suggest methods geared toward selling voluntary tax compliance, increasing the tax base and addressing public grievances concerning taxation.

Among different issues, he mentioned that the affordability of good units is a serious barrier to the utilization of the infrastructure put in throughout the nation.

“The uptake of smartphones and digital devices is crucial for internet adoption. Without affordable devices, this adoption will be significantly hindered,” Mr Temba mentioned.

Contribution of telecommunication sector

The TAMNOA Chairperson, Ms Hilda Bujiku mentioned the telco sector’s contribution to the GDP is round 5.0 per cent and has employed some 1.5 million individuals. Ms Bujiku, who can be Vodacom Tanzania Chief Financial Officer (CFO), mentioned National Financial Inclusion Framework NFI (2023 – 2028) goals to extend monetary inclusion to 75 per cent come 2028.

The assembly was additionally attended by varied stakeholders, together with the Media Owners Association of Tanzania (MOAT), the place they’d the chance to current their suggestions on enhancing the tax system, notably in relation to excise obligation.

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MOAT Board Member, Ms Jacqueline Lawrence, prompt that lowering excise obligation from 5.0 per cent to zero could possibly be offset by the income generated from encrypting Freeto-Air (FTA) channels, which might assist increase VAT.

“We suggest lowering the excise obligation on subscription income from 5 per cent to zero per cent to make Pay-TV providers extra reasonably priced, drive market development and improve income assortment.

“To offset potential revenue losses, we recommend encrypting Free-To-Air (FTA) channels, except the Tanzania Broadcasting Corporation (TBC) and Zanzibar Broadcasting Corporation (ZBC), thereby bringing millions of currently non-paying viewers into the taxable subscription base,” she mentioned.

The nation has over 8 million TV customers, however solely 20 per cent pay for subscriptions. “Encryption will eliminate universal decoders, significantly boosting both excise duty and VAT collections.” she underscores.

Withholding tax on channel procurement and native movie

Moreover, she proposes the discount of withholding tax on overseas and native channels from 15 per cent to five per cent, and nil per cent on native movies to encourage funding.

“High withholding tax [15 per cent] on local or foreign channels and films discourages investment and growth.” she mentioned, including that declining in funding reduces native content material manufacturing and competitors.

Withholding Tax for Payments to Foreign Vendors for Satellite Services

Ms Bujiku mentioned at present, satellite tv for pc providers are taxed 10 per cent withholding tax, which imposes heavy monetary pressure on Pay-TV operators. She really useful the discount of it to five.0 per cent to make sure sustainable operations.

On withholding tax for royalty funds to native sports activities entities, together with the Tanzania Football Federation (TFF), that are taxed at 5.0 per cent, she says this taxation reduces the funds accessible for sports activities golf equipment, impacting their operational budgets and salaries.

“Globally, countries like the UK, Australia and Ireland exempt such payments from withholding tax, recognising the developmental importance of reinvesting in sports,” she mentioned.

Furthermore, she proposed the exemption of the royalty funds to native sports activities entities from withholding tax to assist the expansion of the nation’s sports activities sector.

Tanzania Women Lawyers Association (TAWLA)

Representing the affiliation, TAWLA Member, Ms Madeline Kimei proposes the creation of a pleasant enterprise local weather to facilitate the formalisation of the casual sector, which is predominantly pushed by ladies.

This transfer, she argued, will assist develop the tax base within the nation. Ms Kimei’s key proposal is to supply incentives, together with a six-month tax exemption for the brand new small-scale enterprise house owners and entrepreneurs as soon as they began enterprise.

She means that the federal government may problem identification playing cards to all registered entrepreneurs and impose a minimal tax on their companies, particularly these run by ladies. Additionally, she mentioned there’s a want for larger efforts in tax training in the neighborhood to lift consciousness about tax compliance.

“Many people fail to meet their tax obligations due to lack of knowledge. “The lack of tax education results in low levels of voluntary tax compliance,” she mentioned.

She prompt that TRA ought to associate with Non Governmental Organisations (NGOs) to supply tax training to residents.

Furthermore, she really useful a discount in sure authorities charges, notably licensing charges from companies such because the Business Registration and Licensing Agency (BRELA), the National Environment Management Council (NEMC), the Energy and Water Utilities Regulatory Authority (EWURA), the Fire Brigade and the Occupational Safety and Health Authority (OSHA). This charges discount will lure SMEs to formalise their enterprise and develop the nation’s tax base.

“This will encourage investors to start businesses in various sectors, including education, petroleum, tourism and agriculture,” she mentioned.

City Service Levy

TAWLA means that the levy ought to be based mostly on revenue fairly than gross sales turnover, as companies generally make little or no revenue. Ms Kimei mentioned at present the levy is collected no matter whether or not companies or corporations make a revenue or not in the course of the assortment interval.

“Taxes should be collected based on profits rather than the current system of collecting from sales turnover,” she underlines.

TAWLA’s views had been seconded by the Tanzania Media Women’s Association (TAMWA) who outlines varied challenges affecting the tax system within the nation and offers suggestions for enhancing the system.

Tax for small enterprise house owners

The TAMWA Executive Director, Dr Rose Reuben, mentioned that SMEs face a heavy tax burden, which is a serious problem for them in growing productiveness and attaining their enterprise targets resulting from restricted sources.

Dr Reuben proposed the introduction of methods to scale back and simplify the tax fee course of for SMEs together with offering a grace interval, particularly in the course of the startingup section of their companies.

Tax Education in Improving Compliance TAMWA boss additionally describes lack of tax training as a problem affecting tax assortment.

“There is insufficient education about the tax system for citizens and entrepreneurs, especially the youth and women. This leads to many unaware people on how to fulfil their obligation of complying with tax issues,” she mentioned.

In this regard, she suggests the institution or continuation of tax training campaigns for residents and entrepreneurs, together with particular teams equivalent to ladies and youth, to supply larger understanding of the significance of taxes and the way to fulfill their tax obligations.

Conclusion

The proposed tax reforms, together with exemptions on good units, the discount of excise obligation and the encryption of Free-to-Air channels, goal to drive digital inclusion, improve broadband adoption and foster financial development.

TAMNOA emphasised the significance of bridging the utilization hole for broadband infrastructure and advocated for tax measures that may decrease obstacles to digital entry.

MOAT prompt a discount in excise obligation and the encryption of FTA channels to spice up VAT and excise obligation assortment, whereas additionally proposing a discount in withholding taxes to encourage funding in native media and leisure.

TAWLA centered on fostering a pleasant enterprise atmosphere for girls entrepreneurs and SMEs, recommending tax exemptions for small-scale companies and higher tax training to extend compliance.

The stakeholders have it that implementing these reforms, the nation is poised to create a extra conducive atmosphere for financial growth, enhance tax compliance, and develop entry to the digital financial system.