How Zanzibar revenue rose 86 percent in three years

The ZRA Commissioner General, Mr Yussuf Juma Mwenda, said yesterday that three years ago, they could collect only Sh379 billion per year, but during the financial year 2022/23, a total of Sh675 billion was garnered.

ZRA has collected more than Sh195 billion during the first quarter of the current financial year (July to September), Mr Mwenda said.

He was speaking during an interview with the Zanzibar Broadcasting Corporation (ZBC) ahead of a planned commemoration of President Hussein Ali Mwinyi‘s three years in office.

“This is among the great achievements of the three years of President Mwinyi in tax collection,” he said.

The rise in revenue collections stems from ZRA’s commitment to achieve its set targets—to raise taxes by in-creasing the number of taxpayers as well as efficiency in the collection mechanisms.

With the administration of President Mwinyi coming up with business- and investment-friendly policies, Mr Mwenda said, the number of individuals and corporate bodies that do business in the Isles has been on the increase, which is good news for the revenue body.

During the past three years, the ZRA has registered 11,182 new taxpayers.

Out of the total, 5,700 taxpayers were registered this year.

As such, the tax-to-GDP ratio has risen from nine percent in 2020, when President Mwinyi came to power, to 15 percent in 2023 as he marks three years in office.

The decision to upgrade the then Zanzibar Revenue Board (ZRB) to form the ZRA, Mr Mwenda said, is also partly the reason behind a surge in revenue collection.

Before being appointed to head ZRA in January this year, initially Mr Mwenda was the Commissioner of ZRB.

Data from the Bank of Tanzania (BoT) show that domestic revenue was Sh117.5 billion in August 2023. Domestic revenue collection, the BoT says, was 5.7 percent above the monthly target, with all revenue categories performing above the targets except tax on imports, Value Added Tax (VAT) and Excise Duties (local) which were below target by only 5.2 percent and two percent, respectively.

Tax revenue, the BoT says, increased by 20.3 percent to Sh97.7 billion compared to the amount recorded in Au-gust 2022.

Mr Mwenda said President Mwinyi ordered the authority to enhance voluntary tax payment, increase efficiency by ZRA employees, and make sure they establish a user-friend system that will ease tax collection.

In the implementation of the directives, Mr Mwenda said they have introduced a new ZRA structure, improved tax services in its offices in different regions of Unguja and Pemba, and used tax collection systems including the Virtual Fiscal Management System (VFMS) and the Zanzibar Integrated Domestic Revenue Administration System (ZIDRAS).

“The new tax collection system has boosted government revenue collections and efficiency, as taxpayers can now be registered and even pay their tax returns wherever they are without going to ZRA offices,” he said.

He said that they have also improved the capacity of ZRA employees, which has increased efficiency and credibility.

New departments

Mr Mwenda said that under Dr Mwinyi’s leadership, they have also established four departments at ZRA with the goal of boosting tax collections as well as service provision.

Under the arrangement, ZRA established the large taxpayers’ department, which deals with businesspeople who pay more than Sh100 million annually. The group, he said, contributes 58 percent of all taxes collected.

The other three departments include those dealing with small taxpayers, property tax, and tax investigation departments. The latter investigates tax evasion, especially by those who do not issue receipts.

Plans were underway to establish an international tax department for foreign tour operators.

“In making sure we provide good services to our customers, we are building offices in every region so that we can bring services closer to taxpayers,” he said, adding that this will expand their tax base.

Double taxation

The achievements notwithstanding, ZRA also has to contend with a number of challenges, including double taxation, especially involving the sides of the union of the United Republic of Tanzania. This happens mainly when products from Zanzibar move to the Tanzanian mainland and vice versa when traders find themselves in a situation where they pay twice in revenues.

In trying to find a solution to the challenge, ZRA was working with the Tanzania Revenue Authority (TRA), said Mr Mwenda, adding that they were finalising plans to unite the tax payment system so that a person can only pay tax once.

“When this is complete, these complaints will become things of the past. As long as you have legal receipts from ZRA or TRA, you will not be charged tax twice,” he said.

Similarly, he said, the two revenue bodies were also in talks on how to introduce a digital service tax for online businesses.

Property Tax

In an effort to expand the tax base, ZRA, Mr Mwenda said, will now start applying a specific rate as a tax on properties instead of the current system whereby property owners pay in accordance with the value of their properties.

To achieve this, the ZRA is determined to operationalise the Property Tax Act, No. 14 of 2018, which has been idle since its establishment.

As such, property owners in Zanzibar should get ready to start paying Sh10,000 for a storey of every multiple-story residential building or unit, while those owning commercial buildings will have to pay Sh50, 000 per storey.

Property tax on hotels is classified according to the star rating of the hotel, whereby a five-star, four-star, three-star, two-star, and one-star hotel operator will pay Sh500,000, Sh400,000, Sh300,000, Sh200,000, and Sh100,000, respectively, in property tax.

“This tax should be paid by November 30, 2023,” he said, adding that other houses like worship places and diplomat houses are exempt from paying property tax.

In another development, Mr Mwenda said that as technology grows, ZRA wants to have an automatic system that works 24 hours a day, which will add efficiency to tax collection.

To mark President Mwinyi’s three years in office, Mwananchi Communications Limited (MCL), in collaboration with the Zanzibar Broadcasting Corporation (ZBC), has organised a conference to assess the state of affairs during the 1,096-day period.

The forum that will run with the theme “Three Years of Dr Hussein Mwinyi: Achievements, Opportunities, and Challenges” is scheduled to take place on October 31, 2023, from 9am to 12pm at the Golden Tulip Zanzibar Airport Hotel.