TRA misses revenue collection target

Dar es Salaam. The government might be finding it increasingly difficult to finance this year’s budget as revenue collections fell short of target amid uncertainty in the inflow of donors’ funds in the wake of the escrow scandal, BusinessWeek reports.

Data gathered by BusinessWeek shows that domestic revenue collections fell short of target by13 per cent during the first quarter of the current fiscal year, largely on account of shortfalls in import duties and in non-tax categories.

Some Sh2.634 trillion was collected in total revenues (including Local Government Authority’s own sources) during the first quarter of 2014/2015 – a Sh400.9 billion shortfall against a Sh3.035 trillion target, according to data released by the Bank of Tanzania (BoT).

TRA attributes the shortfall to two main factors – the first being reluctance by some traders to use electronic fiscal devices (EFDs).

Besides, there is also a tendency of Tanzanians not to regard receipts as their right whenever they buy goods from some shops. “This sounds simple but it helps some unscrupulous businesspeople to under-declare their sales, resulting into tax losses,” the TRA director of education and taxpayer services Richard Kayombo told BusinessWeek.

He, however, noted that TRA was working with various businesspeople in the country to educate and encourage traders on the need to install EFDs – a development that will rekindle the taxman’s fortunes.

In the same vein, the taxman is planning to install EFDs on all petrol filling stations that operate in such a manner that an electronic receipt is printed automatically even if one has not asked for it.

“We are also continuing with measures to curb smuggling which has been among the main reasons for tax evasion,” said Mr Kayombo.

The drop in revenue collections comes amid decisions by Tanzania’s 14 development partners - who channel their funds directly to the country’s budget under the general budget support (GBS) modality – to withhold some $558 million (about Sh1 trillion) that they had pledged for the 2014/2015 budget pending the release of the two probe reports on the $250 million in Escrow monies.

If the Sh400.9 billion were to be collected, it would be enough to build 400 kilometres of road at tarmac level. Similarly, going by the 2014/2015 budget, the money would be enough to finance up to eight ministries during the 2014/2015 financial year.

The ministries and their approved budget funds in brackets include: Vice President’s office (Sh68.48 billion), Ministry of Livestock and Fisheries Development (Sh66.14 billion), Ministry of Community Development, Gender and Children (Sh30.23 billion) as well as Ministry of Communication, Science and Technology (Sh67.22 billion).

Others include Ministry of Information, Youth, Culture and Sports (Sh35.37 billion), Ministry of Labour and Employment (22.96 billion), Ministry of East African Cooperation (Sh23.78 billion) and the Ministry of Natural Resources Sh75.68 billion. In total, the eight ministries will spend some Sh389.8 billion – suggesting that if the money were to be collected, some Sh11.1 billion would remain and be spent on other projects.

Analysts say the missed amount would have significant effects on the country’s economy.

“Such a shortfall characterized by refusal of donors to disburse development funds as promised will significantly impact the ability of the government to implement development projects. With such a trend it will reach a stage where the government will fail even to pay Other Charges (OCs) like paying bills,” said a University of Dar es Salaam economics Professor Humphrey Moshi.

The private sector will also be equally affected by the shortfall.

“If the government fails to implement its planned development projects like construction of roads and railways, the country’s private sector will also face a major blow in running smoothly its businesses.” According to Prof Moshi, the government must consider to increase the existing tax-base by formalizing the informal sector.

“Corruption among TRA officials must also be eliminated.”

The latest Monthly Economic Review reveals that apart from Value Added Tax (VAT) and excise on local goods which recorded a 1.5 per cent increase in revenue, all sources of domestic revenue registered shortfalls.

While the government managed to collect only Sh2.40 trillion as tax revenue from the targeted Sh2.7 trillion, it collected only Sh979.7 billion from taxes on imports – 8.9 per cent less than Sh1.07 trillion target.

On the other hand the government failed to collect the estimated Sh1.07 trillion from income taxes and only managed to accumulate Sh877.15 billion.

Non-tax revenue on its part fell short to as low as 34.78 per cent as the government managed to collect only Sh145 billion in the first three months of the on-going financial year from the targeted Sh219 billion.

Revenue collected from local government own sources amounted to Sh89.79 billion - reflecting a 21.66 per cent of the estimated Sh114.61 billion.

Addressing participants to the taxpayers’ day in Dar es Salaam on Friday, November 21, TRA commissioner general, Rished Bade said a culture of paying tax was still a problem amongst Tanzanians and that it was difficult to improve the tax base. “It is a major challenge yes, but we are doing our best to educate people on the importance of paying tax and we believe that the situation will improve,” said Mr Bade during the taxpayers’ day.