TRA for fair, transparent tax administration

16Jun 2016
Our Reporter
The Guardian
TRA for fair, transparent tax administration

In this exclusive interview, the Commissioner General of Tanzania Revenue Authority (TRA), ALPHAYO KIDATA, spells out his leadership vision and priorities as well as the agency’s strategies to help deliver tax collection targets...

Alphayo Kidata

QUESTION: What are your priorities as the new Commissioner General of TRA?

ANSWER: Tanzania Revenue Authority’s main function is to assess and collect government revenues therefore as the TRA Commissioner General my priorities are based on making sure that this core function of the Authority is implemented to enable the government fulfil its obligations to the citizens of Tanzania.

In order to make this possible, we as TRA try our level best to ensure that all taxes are paid to the government according to the law, everyone who is required to pay taxes does so and we build an environment to ensure that the tax administration is fair and transparent.

We shall also focus on implementing strategies that minimize as much as possible tax evasion in all its forms. Another area which is a challenge is tax exemptions, therefore we shall continue to recommend for reduction of exemptions on one hand while monitoring the use of the granted exemptions to deter abuse.

Staff integrity is another area of priority, as we try our level best to enhance voluntary compliance so TRA has zero tolerance to corruption. This will enable taxpayers to meet their tax obligations while knowing that the payments are going to the right government coffers for provision of public services.

Q: Under your leadership, TRA has in recent months significantly increased revenue collections by crossing the 1trn/- mark for monthly tax collections. What is the secret of your success?

A: Yes, indeed we have been achieving the revenue collection targets as set by the Government in recent months and I can attribute this to mainly the following factors:
a) National leadership support on tax collection issues precisely President John Magufuli
b) Sealing administrative loopholes for tax evasion
c) Weaning out of corrupt officials
d) Commitment of TRA staff in implementing strategies for collection of Government revenue.

Q: President Magufuli has pledged to double monthly revenue collections from previous levels of around 800-900bn/-. How does TRA plan to achieve this ambitious target?

A: The main purpose of Tanzania’s taxation system is to raise revenue in order to fund the provision of public goods, services and other national priorities that will help the Government achieve its development policy objectives. With this in mind, domestic revenue mobilisation remains the most reliable source of financing to the government.

Therefore TRA has set out strategies to achieve this goal set by the President and over time make Tanzania fully finance its government budget using domestic resources.

We have our Corporate Plan which states the vision as “to increase domestic revenue through enhancement of voluntary tax compliance”. To achieve this, the Plan has three areas of focus which are Convenience, Compliance and Continual Improvement.

Some of the initiatives and strategies that will be implemented to enhance domestic revenue in line with the vision and the areas of focus are:
a) Implementing ICT-based tax administration to enhance convenience and compliance such as use of electronic services such as e-filing; e-payments; enforcement on the use of Electronic Fiscal Devices (EFDs) with the Electronic Fiscal Device Management System; use of Tanzania Customs Integrated System (TANCIS); Electronic National Single Window system for port operations.
b) Implementing sector specific Compliance Strategies to ensure that each sector contributes its fair share of taxes.
c) Enhancing overall tax administration capacity for dealing with multi-national companies and emerging sectors.
d) Enhancing taxpayer education for the informal sector formalization so as to widen the tax base
e) Enhancing good governance by embracing our core values of integrity, professionalism and accountability as part of TRA’s business operations.

With these initiatives and continued support from the Government, patriotic citizens and other taxpayers, the media and other stakeholders, on one hand and with zero tolerance on tax evaders and corrupt staff, we are confident that the objectives will be attained.

Q: What plans does TRA have to broaden the tax base and increase compliance?

A: The tax revenue collection in Tanzania shows that about 41 per cent is collected by the Customs as imports related taxes while another 41 per cent is domestic taxes collected from the large taxpayers who are about 475 in number and the remaining domestic taxes of 18 per cent comes from the small and medium taxpayers who make the base of taxpayers. With a focus of enhancing domestic tax mobilisation, this topography is not ideal as the reliable domestic taxes contribute only 59 per cent of total taxes.

With this in mind, I have earlier mentioned ICT based services which will enhance convenience as well as compliance and the reduction in exemptions, the following additional initiatives to broaden the tax base and increase compliance will be implemented:
a) Verification of the integrity of the existing registered taxpayer base and use third party information to register those that ought to be registered.
b) Support voluntary tax compliance by ensuring that taxpayers have access to information and initiatives to reduce compliance costs
c) Implementation of an effective risk management system by identification and mitigation of compliance risks
d) Have an effective tax dispute resolution mechanism and enforce deterrent measures for non-compliance as stated in the tax laws.
It is my expectation that these initiatives when implemented in their totality will broaden the tax base and increase compliance.

Q: How is TRA dealing with the problem of large-scale tax evasion by big companies?

A: Let me start by mentioning that we do not have any reliable information showing large-scale tax evasion by big companies.

We however appreciate that as companies grow, their tax affairs become complex, some of them develop networks beyond borders as is the case for multinational companies.

The complexity of the organisational set-up of multinationals and range of their operational coverage, the complexities of their accounting methods and interrelations with sources of their supply pose a challenge to any tax administration.

Some of those operations, such as mining, oil and gas, telecommunications and the like, require specialized audit skills.

TRA together with other tax administrations is dealing with overall international taxation issues which come with operations of multi-national companies.

TRA has established an International Taxation Unit, which has staff with specialised skills for auditing sectors of mining, oil and gas, telecommunications, financial services, construction, real estate and tourism.

Tanzania has established extensive engagement with other revenue administrations in Africa and elsewhere, multilaterally or bilaterally in dealing with international taxation through experience sharing, signing of different agreements for automatic exchange of information and capacity building.

It is my expectation that, the skills acquired on a continuous basis and the ongoing tax compliance interventions will enable TRA to collect the correct amount of taxes from the “big” companies.

Q: What impact have Electronic Fiscal Devices (EFDs) had on taxpayer compliance and TRA's administrative efficiency?

A: EFDs were introduced in order to increase controls, curb possible loopholes on revenue leakage in the retail and wholesale trade sectors to achieve smooth and sustained improvements in tax collection. The use of EFDs has been implemented in two phases.

The first phase became operational with effect from July 1, 2010, and covered all Value Added Tax (VAT) registered traders while the second phase started on July 1, 2013, covering non-VAT registered traders.

The second phase was intended to bring on board a segment of traders with a gross annual turnover of 14m/- and above.
Phase one was successfully implemented whereby TRA could see increases in VAT collections and was able to match taxpayers’ information for compliance purposes through VAT returns and the EFD Management System in TRA which captures the “Z” report as sent by the traders.

Unfortunately, phase two faced a number of challenges including taxpayers’ resistance to fully utilize the machines, pricing and after sales support services. As a result of these challenges, the implementation of EFD phase II has not yielded expected results yet.

TRA continues to partner with relevant stakeholders to mitigate the challenges and make phase two a success as well.

Apart from the challenges, the use of EFDs has increased TRA’s management information system for compliance purposes through the EFD Management System (EFDMS) which links the EFDs directly to the central servers in TRA. EFDs are therefore a proper record keeping tool for taxpayers and a very potent compliance management tool for TRA.

Q: There are reports that some traders, including wholesalers and retailers, are currently evading taxes by not recording the vast majority of their business on EFDs, particularly as regards sales and the value-added tax (VAT) payable on sales.

Most of the sales at busy areas such as Kitumbini in Dar es Salaam are done without using EFDs, which means that TRA is losing tax. How do you comment on these reports?

A: As mentioned earlier, this is one of the major problems we have been grappling with in exploiting the gains of using EFDs. Although it is a requirement by law that all traders with annual turnover exceeding 14m/- must acquire and use EFD machines effectively in their daily transactions, still there is limited proper use of the same.

As mentioned in the preceding question a big number of taxpayers in the second phase have not acquired the machines and those in possession of the machines use them sparingly. Non-issuance of fiscalised receipts remains a problem. Traders are reluctant to issue receipts, while buyers buy without demanding receipts from sellers.

This undermines the gains that are expected of these important compliance tools.
To redress this problem, TRA is implementing awareness programmes including educating the public on their rights and obligation of issuance and demand of receipts; on the importance of EFDs as a tool of ensuring compliance and ease of record keeping by the trader and engaging in advocacy and dialogue programs with various Stakeholders on the importance of EFD usage.

Apart from awareness programmes, the Authority conducts VAT compliance verification exercises on perpetual VAT repayment fund applicants; undertakes surprise visits and checks; conducts audits and applies sanction to identified defaulters as provided for by the law.

Recognising that successful implementation of EFDs compliance systems requires a culture of issuing and demanding receipts, publicity activities on the importance of acquiring and usage of the Devices and demand of receipts will continue to be part and parcel of interventions TRA will sustain.

For this to succeed, it needs concerted efforts by all citizens.

The second part of the interview to continue tomorrow in same page.