CAG: Understated taxpayers’ audit files tops 12.6bn/-

02May 2022
Francis Kajubi
Dar es Salaam
The Guardian
CAG: Understated taxpayers’ audit files tops 12.6bn/-

THE Controller and Auditor General (CAG) has urged the central government to ensure that Tanzania Revenue Authority (TRA) is equipped with enough and skilled tax auditors to avoid understatement of taxes that amounted 12.63billion/- in the 2020/21 fiscal year.

CAG Charles Kichere

The CAG also recommends enhancement of the capacity of tax auditors and assists in developing and acquiring an integrated tax system.

According to the CAG report on taxpayers’ audit files for the financial year under review, understated Corporate and Personal income taxes amounted 5.27bn/-, withholding taxes amounted 2.93bn/-, stamp duty amounted 218.35million/- and Value Added Tax (VAT) amounted 3.80bn/-.

However, understated taxes for the Skills Development Levy amounted to 417.69million/- .

“I recommend that the government should ensure the Authority is equipped with enough and skilled tax auditors, enhance the capacity of tax auditors and assist in developing and acquiring an integrated tax system,” states CAG Charles Kichere in the report.

The report asserts that understatement of corporate and personal income taxes has resulted from the overstatement of direct and indirect expenses by taxpayers such as unrealized exchange loss, overstatement of purchases, overstatement of finance costs, unjustified expenses on postage and courier.

Moreover, the other reasons are expenses not wholly and exclusively incurred for generation of taxable income and unjustified preoperative expenses. Similarly, the understatement of Skills Development Levy was caused by taxpayers understating employees’ gross emoluments in the monthly payrolls filed to TRA.

Also, the understatement of Withholding taxes on service fees, royalties, rental, professional services and digital marketing were either due to not being charged or paid by taxpayers in the course of business.

Understatement of VAT was attributed to under declaration of sales in returns filed by taxpayers and non-charging of VAT on the realization of assets disposed, understatement of Stamp duty was due to non-charge of duty on contract agreements. The understatement of taxes might result into loss of government revenue.

On the other hand, CAG review of block registers conducted in seven tax regions noted that, out of the sampled 11,744 taxpayers, 10,108 taxpayers (86.1 percent) in the blocks were not issued with assessments for the year under review.

Further, he found deficiencies in block management such as inadequate frequency of visiting blocks by tax officers, and non-preparation of physical performance reports for the blocks.

Kichere states that the shortfalls were caused by inadequate compliance with block management operational procedures and the inadequate number of staff in managing blocks.

He warns that inadequate monitoring and supervision of taxpayers in the blocks could first limit business information of taxpayers to facilitate correct assessments.

Secondly, could limit regular updates of traders’ information to facilitate categorization of traders to ensure correct taxes are timely paid and thirdly, expansion of the tax base and enhancement of Government revenue and to deter tax evasion.

“The central government should ensure that adequate assessments are issued to taxpayers to enhance the collection of government revenues as well as increase the number of staff to improve management of taxpayers in the blocks in order to increase revenue,” states the CAG.

 

 

 

 

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