Tanzania: Anxiety as tax collection falls short of targets

08 March 2010, The Citizen
URL: http://www.thecitizen.co.tz/newe.php?id=17666

Dar es Salaam: The government may find it increasingly difficult to finance its 2009/10 budget as domestic revenue collections remain below target.  Economists have continued to blame the policymakers for underestimating the impact of the global economic crisis during budget preparation.

In the first five months of 2009/10 financial year, the tax collector missed the target by 10 percent, according to the ministry of Finance and Economc Affairs permanent secretary, Mr Ramadhan Kijjah.   While Mr Kijjah announced the findings at a press conference yesterday, The Citizen reliably learnt that Tanzania Revenues Authority (TRA) missed its own revenue collection targets by Sh224.9billion or 7.866 per cent in the first seven months of the current financial year.

TRA - the government's revenue collection body - managed to collect Sh2.634 trillion between July 2009 and January 2010, against the target of collecting a total of Sh2.859 trillion during the seven months.

Mr Kijjah told reporters yesterday that between July and November last year, tax collections amounted to Sh1.737 trillion compared to the target to collecting Sh1.923 trillion. "This amount is equivalent to 90 percent of the target. Non tax revenue at the period was Sh87.9 billion, equivalent to 85 percent of targeted Sh103.3 billion," he said.

The Permanent Secretary attributed the dismal collections to a number of factors chiefly being the global economic crisis.  The 2009/10 budget requires TRA to collect Sh4.856 trillion, out of the envisaged domestic revenue collection of Sh5.096 trillion to help finance the Sh9.513685 trillion-budget.

With only Sh2.634 trillion collected in seven months, the taxman has a daunting task of collecting Sh2.222trillion in five months from February to June if the budget, passed by the national assembly in June last year, is finance the government plans by 100 percent.

The Sh2.222 trillion, required to execute the budget, means that the taxman is required to garner an average of Sh444.4 trillion each month from July 2009 to January, 2010.  But the tax collector managed an average of Sh376.086 billion a month. It is now faced with a daunting task of attaining Sh68.086 billion more in each month.

In recent interview, the Finance and Economic Affairs minister, Mr Mustafa Mkulo, had however, wiped out fears that dwindling domestic revenues may negatively impact on budget execution, saying things have started to improve.

"What I know is that things are improving and that we have a contingency plan that in case things do not go as planned, then the actual shortfall should not be less than five per cent which can, in no way, not make a serious impact on budget execution," he said referring The Citizen the TRA commissioner general, Mr Harry Kitillya for detailed clarification.

"He has full information on policy issues to address the situation and he will tell you how the government plans to go about the scenario... as of the information I have, things have started to improve," he insisted.

Mr Kitillya could not be reached for comments yesterday after his number kept ringing without being picked.

Measured by the level by which the taxman misses revenue targets, one notes a slight improvement in December 2009 and January 2010.  In December 2009, TRA missed the target by only three per cent after collecting Sh473.347 trillion against a target of Sh489.917 billion. In January, 2010, TRA's collection target was missed by just six per cent after it managed to collect Sh371.620 billion against a target of Sh395.261 billion.

The two months symbolise a great improvements, considering that the August, September, October and November, 2009 targets were missed by 13, 10, 12 and nine per cent respectively.

A business leader, Mr Felix Mraki, said the country finds itself in the present scenario because the envisaged revenue targets were overestimated and did not put into consideration the effects of global economic crisis on the country's revenue targets.

"During preparation of the budget, it was assumed that the global economic crisis could easily pass without affecting our revenue collections so I�m not amased to see the targets being missed," he told The Citizen.

University of Dar es Salaam's Prof Humphrey Moshi had similar idea, noting that emphasising on the aspect that economy was recovering may be detrimental on the country's planning system.

"Even in the developed world, economic recovery is at its infancy....it's like a sprouting seed that can easily die if the sun shines hot...it's like a child who is only creeping but is yet to stand up and start walking....we will be making a grievous mistake to base our planning on such assumptions," he noted.

Prof Moshi said it was also proper to analyse what is said to be "increasing revenue collections" with a particular focus on the interest rate, noting that it is awkward to measure success in terms of the increase in amounts without considering the actual value of the said amounts.

"The increase in inflation rates should go hand in hand with the increase in amounts being collected for it is only that way that we can be able to visualise the actual value of the amounts being collected," he said.

Just like Mr Mraki, Prof Moshi called upon the government to be fiscally prudent by trying to bridge the gap through cutting on unnecessary consumption costs including eliminating procurement of all unnecessary products and allowances.

"It is disheartening that despite the Prime Minister's repeated utterances, all senior civil servants are still using the luxurious and fuel-gobbling vehicles....T-shirts and head caps produced to beautify seminars are unnecessary additional costs that must be abolished," he said.