A Spate of Tax Reform in Tanzania

Tax reforms in Tanzania have tended to leave some groups largely unaffected or exempted from taxation. However, recent tax reforms under the current government of Hon. Dr. John P. Magufuli, who came to power on November 2015, seem to have affected a wide range of revenue providers. The larger business sector has been targeted, such as the tourism sector, which is no longer exempted from paying VAT, a development they decried as killing the tourism industry. Small traders are also felt the government’s tax fervour with the introduction of excise duty on M-pesa, and with the Tanzania Revenue Authority’s (TRA) insistence on the use of Electronic Fiscal Devices (EFD) to prove VAT payment, also among traders in the informal markets. It is not only big and small players in the economy that have been affected by tax reforms, but also actors closer to the ruling government have felt the heat. Members of the armed forces, for instance, will be receiving the tax relief in a different form from the normal duty free shops located in army barracks, and Members of Parliament are now to be taxed on their retirement benefits. It almost seems as if no one is spared and that President Magufuli is intending to expand the domestic tax revenue bases no matter the protest and no matter the potential position and political influence of some revenue providers. In this study, we ask: In the recent tax reforms in Tanzania, how and to what extent have different revenue providers been involved in policy bargains with the government? We study four groups of revenue providers that have been targeted by the recent tax reforms: the tourism sector, the transport sector, members of the army, and members of parliament. The empirical objective is to study to what extent the revenue providers affected by the recent tax reforms have been involved in any bargaining with the ruling government – both prior to the introduction of tax reforms and not least afterwards, and to establish to what extent they have been compensated or reached a compromise. The theoretical purpose is to explore the strategies and resources that revenue providers use to engage with the government to influence tax policy reform and implementation. Initial indications are that the government’s attempts to push tax reforms meets substantial resistance, but that the government nevertheless has come some way in expanding its tax revenue base.