Tanzania, diplomats to hold high-level dialogue on taxes, investment

Dar es Salaam. Tanzania will hold a high-level dialogue with diplomats, following the latter's concerns regarding the country's taxation system.
In their letter dated June 26, 2024, High Commissioners and Ambassadors from 10 countries expressed their dissatisfaction with how the Tanzania Revenue Authority (TRA) was handling taxation matters concerning investors from their countries.

In the letter addressed to the minister for Foreign Affairs and East African Cooperation, Mr January Makamba, the envoys say despite an increase in the value of registered businesses from $3 billion in 2022 to $5.5 billion in 2023, investors have been encountering significant disruptions from the TRA.

Envoys from the UK, the US, the Kingdom of the Netherlands, Ireland, France, Belgium, Canada, Korea, Sweden, and the Federal Republic of Germany, say foreign investors from their countries were also being subjected to multiple audits by the taxman. The diplomats want a meeting where Tanzania could be represented by policymakers from various ministries that deal with investment issues.

In response, Mr Makamba said in a letter dated June 27, 2024, that the government has accepted the request for a high-level meeting to discuss matters of concern raised by the envoys.

“I will organise the participation of my colleagues whom you requested their presence. For this meeting to be productive, I request that the investors whom you are referencing prepare a compendium/presentation detailing, in specificity, their grievances,” reads part of the letter.

“The sooner this report is presented to us, the sooner we will be able to schedule the requested meeting. I am open to inviting their representatives to our meeting so that we can hear directly from them,” reads Mr Makamba's letter in part.

According to the envoys’ letter, the key business-related ministers expected to attend the meeting include Mr Makamba, the Finance minister, the minister for Investment and Planning, the minister for Trade and Industries, and the TRA commissioner general.

Furthermore, Mr Makamba says the Tanzanian government has placed good governance and respect for the rule of law as key pillars of progress and prosperity.

“We pride ourselves on a political and economic governance regime that is attractive to investments and facilitative of private sector development,” reads part of his letter.

He says the success in attracting Foreign Domestic Investment (FDI) into Tanzania over the past three years, which had been cited in the envoys' letter testifies to the confidence that the global investment community has in Tanzania.

Mr Makamba assured the envoys, that the government takes very seriously any alleged transgression, by any public entity that endangers the success of any business in the country and its reputation as an investor-friendly destination.

“Our commitment to protect all investments and ensure their success is ironclad,” he says in the letter.

But according to the envoys, foreign companies have been receiving unevidenced notices from TRA demanding payments and account reconciliations backdated to 15 years.
“Many companies have faced ‘back agency notices’ that freeze accounts, halt operations, and negatively impact employee salaries and supplier's cash flow,” reads part of the letter.

Furthermore, the envoys say, companies have signed tax concession agreements with the Tanzania Investment Centre (TIC) and line ministries, just to be advised that TRA will neither recognise nor honour the agreements because they haven't been gazetted in Dodoma.

They say investors have reported that TRA levies extraordinary tax bills that are not supported by Tanzanian laws, threatening investors and the country’s partners when companies protest or appeal the said practices, and freeze or seize bank accounts and company assets without notification nor prior legal recourse.
Regarding the multiple audits, the envoys say throughout the years, the companies have undergone audits by major international audit firms, approved by the Tanzanian government, to ensure adherence to international auditing standards.
“Others are TRA audits of the audits conducted one to two years and internal investigations of audits conducted by TRA, effectively resulting in double audits,” reads another part of the letter.
They said despite the aforementioned rigorous procedures, companies are now receiving notices with additional demands for tax payment.
“For instance, one company received a notice for Sh1.2 billion, demanding resolution within three working days for discrepancies dating back 12 years, under the threats of having their operational accounts frozen and the funds withdrawn,” reads the letter.