Tanzania to broaden tax base through electronic receipts
1 May 2013
The Tanzanian government expects to collect 600 billion shillings ($370 million) a month after a new tax system expanding the use of electronic tax register (ETR) machines takes effect on May 15th. Currently, the government collects 400 billion shillings ($250 million) per month in taxes. ETR machines tabulate sales receipts at the close of each business day and electronically send that data to the Tanzania Revenue Authority (TRA) for an accurate tax assessment.
“Under the new system, businesses that earn anything from 14 million shillings ($8,600) to 40 million ($25,000) from now will have to use ETR machines,” said TRA Deputy Commissioner for Domestic Revenue Generose Bateyunga. Previously, these businesses could simply estimate their taxes.
Bateyunga told Sabahi that about 200,000 taxpayers have been avoiding paying taxes or underpaying, adding that aid from donors has been decreasing, therefore Tanzania must broaden its tax base to fund development. In 2010, when Tanzania introduced ETR machines, tax collection improved by 9.6% for the 2010-2011 fiscal year and 23% for 2011-2012. “We are implementing phase two, which will bring on board even more tax payers,” she said.
TRA Director for Education and Taxpayer Services Richard Kayombo said the authority decided to roll out ETRs due to the difficulty of monitoring sales from manual receipts, as dishonest businesspersons have been under-declaring their sales or not issuing receipts at all.
“We are now embarking on the massive campaign for people to demand receipts for anything they buy. Even if it is a beer, a soda or a needle worth 10 shillings, get the receipt,” he told Sabahi. “We ask Tanzanians not just to demand receipts, but to make sure they are ETR receipts and they depict the correct amount paid.”
Kayombo said anyone who sells anything without issuing an ETR receipt will risk being fined 3 million shillings ($1,900) on the spot or twice the amount of the tax evaded, which may be more. TRA Commissioner General Harry Kitilya said that under this second phase, even petrol stations will now be required to issue ETR receipts.
“We have started a pilot project with Engen petrol stations to test our new ETR machines fixed to the pumps,” he told Sabahi. “From now on, when you lift the handle, the machine starts counting how much you have spent. When the handle is returned to the pump, it automatically issues the receipt.”
Under the new system, pumps cannot serve the next customer before issuing a receipt for the preceding customer, he said.
Kitilya said that depending on the success of the second phase, the TRA may implement the ETR system to all businesses nationwide to reduce complaints and increase efficiency. Potian Michael, owner of a welding company in Dar es Salaam, applauded the government’s decision to expand the use of ETR machines. Under the old system, he overpaid because the TRA over-estimated his sales, he said. AP Media and PR Consult Limited Managing Director Peter Keasi said broadening the tax base is a good idea, but voiced scepticism over the government’s ability to change people’s attitudes.
Tanzanians are not used to demanding a receipt when they purchase goods or services, he said, therefore the campaign to change that must be massive, and the government must ensure that ETR machines truly capture all the daily business activity on market streets.