Informal sector - untapped tax potential?

What you need to know:

Tanzania’s informal sector is significant (which is where the majority of the MSME would be found) but if this sector could be part of the formal economy, the benefits in terms of widening the tax base and collection of tax would be immeasurable.

For MSMEs a constant concern is the numerous levies and charges on employee costs - something particularly pertinent to MSMEs given that these typically are very people driven businesses for which labour costs are a significant component of costs. Taxes related to employment include not just the PAYE borne by the employee, but also a four percent skills and development levy and 0.5 percent Workers Compensation Fund both borne by the employer, and a 20 percent social security cost (borne jointly by employer and employee). One step to help reduce taxes on employment for MSMEs could be to exempt them from SDL. Currently there is an exemption for employers with up to 10 employees and the proposal here would be to consider an increase in this threshold - perhaps to 25 employees - and also to provide for an exemption where annual turnover is below a certain amount, say Sh200 million.

Informal sector - untapped tax potential?

What you need to know:

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