The news on Friday morning, July 24, about the former President Benjamin Mkapa passing away was devastating, to say the least. On July 29, the late Mkapa was laid to rest at his home village of Lupaso in Masasi, Mtwara region. Benjamin William Mkapa was Tanzanian's third president His presidency spanned from 1995 through to 2005. Several good things in Tanzania can be credited to Mkapa as President of the United Republic. In his autobiography titled 'My Life, My Purpose,' Mkapa says a lot of those things himself. But a lot more can be said - more so in the tax space.
It was during his Presidency that Tanzania made some of the most significant positive tax reforms. As we continue to mourn the late President, I re-count some of the fundamental tax reforms made during his tenure as head of state:
Establishment of TRA: The Tanzania Revenue Authority was established by Act of Parliament No.11 of 1995. But it started operations on July 1, 1996. This was fundamental. Before establishment of TRA, tax administration functions were scattered as government departments under the ministry of Finance. TRA was established as a semi-autonomous government institution and, from 1996 to 2005, annual tax collections quadrupled in absolute values.
Introduction of VAT: For the first time, Tanzania introduced a value-added tax (VAT) regime in 1998 through the VAT Act, 1997. VAT is broad-based consumption tax that replaced sales tax.
On average, VAT contributed 36 percent of tax collections in Mainland Tanzania during the periods to 2005. To-date, VAT remains one of the major taxes in Tanzania
Excise Duty: Excise duty is one of the oldest taxes in Tanzania, dating back to pre-independence. But it was only levied on domestic goods. However, in the 2000s, Tanzania expanded the scope of excise duty to some services.
In 2002, excise duty on airtime services by mobile telephony companies was introduced -and in 2004, it was extended to 'pay-to-view television' biggest revenue sources. It accounts for almost a quarter of all excise duty collected on domestic goods and services.
Customs: It was during the late Mr. Mkapa's Presidency that the EAC Customs Management Act 2004 was enacted to facilitate the implementation of customs matters in the process to achieve a fully-fledged EAC Customs Union. The new EAC law enabled adoption of Common External Tariffs (CETs) that are applied by all the EAC member states. Customs regulations and rules of origin to administer import duty within the member states were also adopted
New income tax law: The Income Tax Act was enacted in 2004, replacing the Income Tax Act, 1973. We still have the Income Tax Act 2004 today (although amended from time to time). The new law significantly contributed to the improvement in income tax administration in Tanzania for instance, income tax was 30 percent of tax collections is 2004, but the figure had increased to 40 percent in 2015.
As the late President Benjamin Mkapa was laid to rest, these tax reforms coupled with the other economic reforms he initiated remain as his legacies for us to cherish.
'Naked came I out of my mother's womb, and naked shall I return thither. The Lord gave, and the Lord hath taken away; blessed be the name of the Lord’ (Job 1:21, KJV).
May his soul rest in eternal peace, Amen.
By Shabu Maurus, Tax Partner, Auditax International.