Achieving a five-fold increase in tax income from TZS 19.61 trillion to over TZS 98 trillion would require aggressive, multi-faceted reforms across all tax categories and the entire economic structure. This isn't just a tax policy issue; it's an economic growth and governance challenge.
Here are suggested strategies, categorized by the core areas of reform:
1. 📈 Economic Growth and Broadening the Tax Base
The most sustainable way to increase tax revenue dramatically is by significantly expanding the size of the formal economy and the number of taxpayers.
* Formalize the Informal Sector:
* Implement simplified and low-rate presumptive tax regimes for micro and small enterprises (SMEs) to incentivize formal registration.
* Provide incentives (e.g., access to financing, government tenders) for informal businesses to join the tax net.
* Accelerate GDP Growth:
* Invest heavily in infrastructure (power, transport, digital) to reduce the cost of doing business.
* Promote key high-growth sectors (e.g., manufacturing, mining, value-added agriculture, tourism) to increase taxable corporate profits and employment.
* Digital Economy Taxation:
* Develop a robust framework to tax digital services (Taxes on Goods and Services, Taxes on Income) provided by foreign and domestic companies (e.g., e-commerce, streaming, ride-sharing platforms).
2. 🏛️ Tax Compliance and Administration
Improving collection efficiency and reducing evasion are crucial for multiplying current returns.
* Intensify Tax Enforcement and Audit:
* Significantly increase the frequency and depth of tax audits targeting high-net-worth individuals and large corporations, especially those reporting historically low profits (Taxes on Income, Profits and Capital Gains).
* Focus on detecting transfer pricing and other sophisticated tax avoidance schemes.
* Leverage Technology and Data:
* Mandatory Electronic Fiscal Devices (EFD) usage for all VAT registered businesses and link them directly to the tax authority's system (Taxes on Goods and Services).
* Use Big Data and AI to cross-reference data from various sources (banks, land registry, motor vehicle registry, customs) to identify non-filers and under-reporters.
* Streamline the process for filing and paying Taxes on International Trade and Transactions through digital customs systems.
* Enhance Voluntary Compliance:
* Improve taxpayer services and simplify tax forms to make compliance easier.
* Run public campaigns on the importance of tax and the visible use of tax money to build trust.
3. ⚖️ Policy Adjustments and Rationalization
Strategic changes to tax rates and scope, while risky, are necessary for such a high target.
* Value Added Tax (VAT) Expansion (Taxes on Goods and Services):
* Review and narrow the scope of VAT exemptions and zero-ratings to broaden the base.
* Ensure timely VAT refunds to maintain business liquidity and trust.
* Rates and Fees Reform:
* Modernize and professionalize local government revenue collection (Rates and Fees).
* Introduce or increase property tax collection efficiency through cadastral mapping and mandatory registration.
* Wealth and Luxury Taxes (Other Taxes):
* Introduce or increase wealth-based taxes, such as taxes on luxury real estate, non-essential luxury imports, and high-value assets.
* Taxes on Income, Profits and Capital Gains:
* Evaluate capital gains taxation on financial assets and immovable property to ensure effective collection.
* Progressive Income Tax: Re-evaluate top income tax brackets for high earners.
| Tax Type | Key Strategy for 5x Growth | Impact Area |
|---|---|---|
| Taxes on Goods and Services | Aggressively expand VAT base, rigorous EFD enforcement, tax the digital economy. | Compliance, Policy |
| Taxes on Income, Profits and Capital Gains | Formalize informal sector, intense corporate audit, efficient capital gains tax. | Growth, Compliance |
| Taxes on International Trade and Transactions | Diversify exports/imports, streamline customs efficiency, combat smuggling. | Growth, Administration |
| Other Taxes | Introduce effective wealth/luxury taxes, enhance environmental/excise taxes. | Policy |
| Taxes on Payroll and Workforce | Formalize employment, accelerate job creation through economic growth. | Growth |
| Rates and Fees | Modernize and enforce property and local government taxes. | Administration |
The combined effect of a larger, more formalized economy (leading to higher profits and employment) and a more efficient, less corrupt tax administration system would be the two primary drivers required to reach this ambitious goal.