Tanzania: Government Urges Public to Report Tax Complaints Amid Challenges with EFD Machines

By Adonis Byemelwa

The government has encouraged citizens to report tax complaints via a toll-free number while acknowledging challenges in tax collection using electronic fiscal devices (EFDs).

 Finance Minister Dr. Mwigulu Nchemba highlighted these issues during the presentation of the Ministry's 2024/25 budget plan to Parliament on Tuesday, June 4, 2024.

Dr. Nchemba requested Parliament to approve a budget of Sh18.17 trillion for the 2024/25 financial year, up from the Sh15.87 trillion allocated in 2023/24. The Ministry has introduced a system for submitting complaints via the toll-free number 0800111022, which has increased public and taxpayer engagement.

By April 2024, the Tax Appeals Board had received 437 tax disputes worth Sh3.5 billion, adjudicating 388 cases involving Sh2.7 billion and USD 439,281. The Tax Appeals Tribunal registered 112 cases amounting to Sh2.79 trillion, 64 cases worth Sh137.9 billion, and 56 cases worth Sh2.51 trillion are in various stages of hearing.

However, the Budget Committee, represented by Vice Chairman Twaha Mpembenwe, noted that the Tax Appeals Board faces challenges due to a lack of members in 12 regions, causing delays in case hearings and backlogs.

 The 2022/23 report by the Controller and Auditor General (CAG) highlighted 967 pending tax cases worth Sh10.48 trillion, an increase driven by delays in appointing board members.

To address these challenges, the committee recommended completing the appointment process for the remaining regions and allowing members to hear cases in other regions to reduce case backlogs.

Dr. Nchemba also addressed the implementation challenges of the 2023/24 budget, including poor maintenance of EFD machines, lack of network connectivity, low public awareness of demanding and issuing EFD receipts, and increased financial resource needs due to climate change impacts. Some taxpayers were also found to be concealing transaction information and engaging in smuggling.

To mitigate these issues, the Ministry has promoted the use of VFD systems as an alternative to EFD machines, continued public education on the importance of EFD receipts, and improved revenue management systems, including border and coastal patrols to curb smuggling and fraud.

For the 2024/25 financial year, the Ministry aims to collect Sh44.19 trillion of the projected Sh49.35 trillion for the government's budget implementation.

The government's approach to imposing frequent taxes and levies has sparked significant controversy, particularly concerning the impact on ordinary citizens.

Critics argue that these measures disproportionately burden the lower-income population, exacerbating economic hardship.

Former Mzumbe University Professor Honest Ngowi has been vocal about the adverse effects of excessive taxation on mobile phone transactions. He argued that such policies not only strain the average citizen but also stifle economic activity.

 "The imposition of levies on essential services like mobile transactions is regressive and counterproductive. It hampers financial inclusion and economic growth," Ngowi stated.

University of Dar es Salaam Economics Professor Mohammed Bakari shares a similar view. He contended that the cumulative effect of incessant taxes is detrimental to economic stability and social welfare.

 "High taxation levels discourage spending and investment, leading to a slowdown in economic growth. The government needs to reconsider its tax strategy to avoid long-term economic repercussions," Bakari emphasized.

Professor Samuel Wangwe was also quoted criticizing the government's taxation policy, particularly highlighting its impact on low-income earners. "The burden of these levies falls heaviest on the poorest segments of society, widening the inequality gap.

 A more equitable tax system is crucial for sustainable development," Wangwe remarked. Finance Minister Mwigulu Nchemba has faced criticism for his hardline stance on these issues, often dismissing advice from academic colleagues.

He has asserted his extensive experience in finance, at one point controversially suggesting that those opposed to the levies should consider relocating to Burundi for better conditions. This attitude has sparked further debate about the need for inclusive and consultative approaches in fiscal policy-making.

The ongoing debate over Tanzania's tax policies underscores the delicate balance between revenue generation and citizens' economic well-being. Despite efforts to engage taxpayers, challenges persist, including shortages of members in the Tax Appeals Board, leading to case backlogs.

Critics argue that relentless taxation disproportionately impacts low-income earners and stifles economic growth. However, Finance Minister Nchemba remains steadfast, dismissing advice from academics and sparking further discourse on inclusive fiscal policies.

In light of these challenges, Tanzania could draw valuable lessons from the United States' approach to tax collection. The U.S. has implemented robust systems, including stringent audits, extensive taxpayer education, and advanced technology integration, enhancing transparency and compliance. By emulating these strategies, Tanzania could bolster its tax collection efforts and address fraudulent activities, fostering economic growth and stability.