Taxation is one of the oldest functions of the tanzanian government in running her affairs. During colonial era, income, customs and excise taxes were under east african high commission, while district commissioners oversaw the collection of personal tax on behalf of treasury. Under this system, tax payable is established based annual turnover shown by taxpayers records. Simplicity the tax system should be easy to administer and comply with. Subject to certain limited exemptions, tanzanian resident companies and close corporations companies are taxed on their worldwide income as provided on income tax act 2004 section 67.
For the purpose of this study, smes are defined as those operating under the presumptive tax system. Thus currently the new president of tanzania is dr. The focus in section 3 is on the objectives and features of the 1991 tax reform. Tra,presentation on tax administration reforms in tanzania experience and. For residents in tanzania the same is taxed at a single instalment rate of 10%, the disposal is taxed on the net gain realized. However, developing countries face numerous tax policy challenges when they attempt to establish efficient tax systems.
The local government system in tanzania count ofil 201718. Also, it provides an overview of the land ownership system and the institutional structure. Presumptive tax system and its influence on the ways informal. Presumptive tax system and its influence on the ways. Purpose of this study was to assess the impacts of tax administration on government revenue in tanzania case of dar es salaam region. The eac was reestablished in 1999 by tanzania, kenya and uganda. Managing income tax compliance through selfassessment. The established presumptive income tax system is based on solid sector and fiscal policies, and effective legal and institutional systems. The tanzania revenue authority is the government agency of tanzania, charged with the responsibility of managin. The tax systems in mozambique, tanzania and zambia. Authors note this sourcebook has been written for the sole purposes of guiding students of tanzania tax law in the study of the income tax law in tanzania.
Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures, although they serve other purposes as well. Tax system the ministry of finance and national planning is responsible for the formulation of tax policy, in zambia and the implementing agency is the zambia revenue authority zra. Basically taxation in tanzania is in form two types of taxes. With the major aim in taxation issue tanzania taxation portal have the objective of creating awareness to individual,entity,investors as well as public in various taxation issues and related discipline in such a way that any one who is responsible and eligible to pay tax does so promptly,hence enabling the government to increase income together with improvement of various public services. The research was conducted in dodoma municipal council. Tax system of tanzania had evolved overtime to reflect socioeconomic and political situation at the time. Tax reform, tax compliance and statebuilding in tanzania. The top marginal rate of tax for resident individuals is 30%. This study is more scientific and effective, whereby questionnaires have been used to access the required information.
Direct taxes are generally based on a taxpayers incomewealth. This study specifically focus on two issues which are to analyze the extent of property tax systems implementation in tanzania economy, and the property tax systems operating in local government authorities in tanzania. Not like in other countries where property tax base may include land and building. There has been a concern that tax rates in tanzania are high thus discouraging savings, doing. There are principlesa taxpayers ability to pay taxes and who receives.
Along the lines of the indian vodafone case on indirect share disposals, tanzania has followed suit with its own version of a change in control tax. Proportionality the tax compliance burden should not be disproportionate to the businesses sizes, sme should have correspondingly small and medium compliance burden. External support to strengthening the tax systems in africa. The legislative framework relating to the regulation and administration of the taxation is provided for in the income tax act 1966, as amended. The tax plays important role in the growth of small and medium enterprises smes. Read it with the goal of gaining a broad understanding of tax purposes and principles. Details starting a business in tanzania procedure, time and cost no. Introduction to taxation our purposes, the sections on tax structure, types of tax, tax. All central government taxes are administered by the tanzania revenue. Tanzania has 947,303 square kilometres 365,756 mi and sq is the th largest country in africa.
Pdf implementing property tax reform in tanzania researchgate. Finding on the presumptive tax showed that business are registered for presumptive tax, tax education is carried out efficiently, the businesses do not have books of accounts for effective taxation, and tax assessment is not transparent to all tax payers in the same business. The paper provides an analysis of how the presumptive tax system in tanzania influenced the ways in which informal entrepreneurs behave. Pdf study of tax system impact on the growth of small. Under the urban finance act of 1982, local governments may levy. The researcher investigated property tax administration process and the problems associated with it, challenges facing property tax collections and taxpayer perception on property tax. The malawi tax system is a mixture of direct and indirect taxes. The deputy permanent secretary in the ministry of finance and planning, ms. The structure of the tanzanian tax system differs from other low. Walter hellerstein abstract this paper gives an overview of the indian tax system and discusses the challenges in tax collection faced by developing economies using india as a model.
Experience shows that voluntary compliance is best. Article 145 of the constitution gives recognition to local government and is supported by the local government. The tax base and rate structure of the tanzanian tax system has been rationalized and streamlined with. Where the answer differs according to the legal system applicable to the woman or man in question as may be the case in economies where there is legal plurality, the answer used will be the one that applies to the majority of the population. I tried to identify what i want students to know before enrolling in corporate tax or partnership tax and to make certain that i covered these principles in the basic course. Recently there has been a debate on the need for lower tax rates both on incomes and consumption taxes. Effects of the tax system in tanzania on investments and growth. On 14 july 1944, delegates from nine chiefdoms in tanzania met and drew up their objections on the mbiru ta system, noting that the tax was foreign and unafrican. Taxation, imposition of compulsory levies on individuals or entities by governments. The study combines quantitative and qualitative methods in order to assessing the impacts that the administrative practices of tanzania revenue authority tra has on private enterprises.
Ugandas tax structure has been greatly improved in recent years, and it appears to mirror the tax system in other subsaharan africa countries, in terms of the types of taxes and rates. This is an electronic payment system which has been in place for some time and it provides online real time account management and interbank high value or time. There is local government in both tanzania and zanzibar. This intuition will serve well the student who wishes to take more tax classes. Improving tax compliance requires longterm reform efforts, beginning with strengthening the organization and management of the revenue agency, implementing robust collection sys. The challenges of tax collection in developing economies. It is a compulsory contribution or payment for the support of governmental or other public purposes. This lowrate, broadbase strategy was considered to be more consistent in practice with both efficient resource allocation and equity than the highrate, narrowbase pattern that had dominated the tanzanian tax system in the past. The study intended to assess challenges facing property tax collection in tanzania. Ugandas tax structure has been greatly improved in recent years, and it appears to mirror the tax system in other subsaharan africa countries, in. A regressive tax means that higher income households pay less in taxes. Authorized for distribution by katherine baer march 2014. Developing a taxpayer compliance program prepared by barrie russell i. Political environment tanzania has continued to enjoy political stability since it became independent in the early 1960s.
However, for companies the net gain realised shall be taxed at a corporation tax rate of 30% with the single instalment tax creditable. All central government taxes are administered by the tanzania revenue authority tra. The challenges of tax collection in developing economies with special reference to india by pramod kumar rai under the direction of prof. Tax tables for residents of mainland tanzania and for. Impact of tax administration towards government revenue in. It is tax policy in action, not simply the wording of the statute, that determines how much the taxpayer must pay, and the effects of the payment. The tax systems in mozambique, tanzania and zambia capacity and constraints. The system offers speed, safety, easiness, reliability to payment recipients and cost saving to the government. For tax planning purpose require the following guidance. Pare people in tanzania defeat new tax system, 194546.
A case of mwanza tax region by emmanuel cyril moshi a research report submitted in partial fulfillment of the requirement for the award of degree of master of business administration in corporate management m ba cm of mzumbe university 2014. Using three approaches, we consider the impact of a major tax reforma 5 percentage point cut in marginal tax rateson longterm. Although the history is interesting, for 1 unit 01. A good tax system is one where the taxes are well understood. Foreword pkf assurance, audit, tax, advisory and business. Assessment on effective implementation of property tax. Certainty in tax liability is important for smes that sometimes need to make seat of the pants decision. Paying taxes, an annual study from pwc and the world bank group, helps governments and businesses understand how their tax systems compare on the global stage and helps tax administrations learn from what others are doing now in its 14th edition, this years study looks at how advances in technology make paying taxes easier. Online registration system, business registration and licensing authority brela agency a new company would have a business name and a company name. The delegates sent letters to the chief secretary in dar es salaam to voice their objections. Pdf an overview of the cadastral system in tanzania.
A countrys tax regime is always a key factor for any business considering moving into new markets. Mass taxation and statesociety relations in east africa pdf. In the lowincome country like tanzania, role of smes is critical in pushing the socioeconomic development agenda of the country further. Tanzania revenue authority income tax for individuals. Tanzania is a democratic unitary republic with both a national government and a devolved government of zanzibar which has autonomy for nonunion matters. Value added tax administration in east wollega z one has faced different challenges.
An act to introduce currency point system in tax administration. Sep 01, 2012 with the major aim in taxation issue tanzania taxation portal have the objective of creating awareness to individual,entity,investors as well as public in various taxation issues and related discipline in such a way that any one who is responsible and eligible to pay tax does so promptly,hence enabling the government to increase income together with improvement of various public services. The main problems that encountered are the following such as. This paper presents an overview of cadastral system and its historical development in tanzania mainland. Sme tax systems need to be designed in such a way as to minimise compliance costs and maximize accessibility. The study is based on assessing the effective implementation of property tax system. The report also highlights significant allocations in the 201718 budget to various sectors of the economy. Tanzanian economy which may in part exp1ain the present structure of taxation. The reforms of the sme tax system would then need to require compliance commensurate to capacity. The report is critical towards the contracts that had been negotiated between the mining companies.
Taxation system in tanzania the tax regime in tanzania consists of a number of direct and indirect taxes including income tax, value added tax, import duty, excise duty, and stamp duty. By definition, a tax is a compulsory contribution from a person to the state to defray the expenses incurred in the common interest of all without any reference to the special benefits conferred. Section 56 of tanzanias tax legislation applies if there is a change in the underlying ownership of the tanzanian entity of more than 50%. The tanzania economic outlook 2017 report provides an overview of tanzanias economic environment and key sectors. Seeing taxation as a prerequisite of statebuilding requires taxpayers compliance which is defined as meeting legal obligations imposed by the tax system imf. Tanzania by nonresidents are taxed at the single instalment rate of 20% regardless whether the. The tax regime in tanzania consists of a number of direct and indirect taxes including income tax, value added tax, import duty, excise duty, and stamp duty.
The objective of this study is to assess the impacts of the tax regime instruments, rates, administration and coverage on the growth of firms within five key sectors agriculture, tourism, mining, financial sector, and manufacturing and small businesses, in tanzania. Modern tax administrations seek to optimize tax collections while minimizing administration costs and taxpayer compliance costs. The interpretations placed on language by administrators and courts, the. Tanzania adopted and periodically reformed the colonial tax systems starting with. Knowledge of the statute is only a start in knowing a tax system. In tanzania, business firms with annual turnover above 40 million are registered for vat purposes, while those with annual turnover below, 40 million are taxed under presumptive tax system. Value added tax is a tax system that has replaced the sales tax in ethiopia and has applied a uniform rate of 15% on most consumption of goods and services. Nonunion taxes are taxes on domestic consumption, including the value added tax, excise duties, hotel levies, stamp duties, motor vehicles taxes, and other charges 4. The impacts of the local government tax systems on the formalization of small and micro enterprises are also examined. Tanzania offers tax incentives to investors as provided for in the various tax laws including. Researcher has been able to collect information from 85 respondents out of 100 targeted respondents from the area of the study. The eac in december 2004 enacted the east african community customs management act 2004 eaccma. There are also taxes levied at the local government level. Simplification of the income tax system for smes in a more comprehensive manner is strongly supported.