‘Strengthen Tax Base, Predictable Tax Regime to Finance Development Plans’ – IMF Tells Tanzania

Dr. Tao Zhang.

The Deputy Managing Director of the International Monetary Fund (IMF) Dr. Tao Zhang has advised Tanzania to strengthen tax base and ensure a fair and predictable tax regime for collection of sufficient money to finance development projects.

In the statement made available to CTI in Dar es Salaam, Dr. Zhang said that by strengthening tax base under a fair and predictable tax regime, Tanzania could collect sufficient badly needed money to finance its development plans including the ambitious Second Five - Year Development Plan 2017-2025.

He said that foreign borrowing by the public sector has a role to play but it was also important to maintain debt sustainability and contain dependence on foreign capital.

“So it is crucial for Tanzania to mobilise more private and public resources, especially by strengthening tax collection under a fair and predictable tax regime…..This is the area where Tanzania has fallen behind its neighbours” Dr. Zhang underlined.

CTI has been urging the government to rethink and change its attitude where most of its decisions are made without proper consultation with the private sector thereby effecting the relationship between the public and private sector.

“Even if the changes are necessary and compulsory, CTI thinks it that it is vital for the government to involve the private sector to enable them get prepared for the changes” The Second Vice Chairman Shabbir Zavery told the Vice President of the United Republic of Tanzania during the President’s Manufacturer of the Year Awards giving ceremony.

CTI has also been lamenting over sudden and unilateral change of policies and laws by the government. The changes tend to weaken businesses and deter the government’s efforts to woo investment into the country as such decisions impact negatively on manufacturers’ capital.

Dr. Zhang made it clear that despite Tanzania’s Five-Year Development Plan being centered on the theme, ‘Nurturing Industrialisation for Economic Transformation and Human Development’, the strategy relied on Tanzania’s comparative advantage-agriculture and mining and possibilities of Tanzanian becoming a trade and logistic hub for East Africa.

He added that Tanzania should struggle to strengthen the business climate for local and foreign businesses as that could enhance economic diversification, expand trade and deepen Tanzania’s integration into global value chain.

He urged the government to make sure its policy objectives are built and promote the private sector’s growth. He suggested four points to make this happen:

· Make the government decision-making process more transparent and predictable across a range of rules and regulations.

· Cutting red-tapes by simplifying the procedures for opening new businesses.

· Business thrive when the judicial system is seen as fair, so strengthening the framework for resolving legal disputes               becomes key.

· Make sure businesses have a say in policy by broadening consultations with the private sector on planned reforms, including changes to legislation.