Hyatt Regency Dar es Salaam. A REMARKS ON SELECTED TAX POLICY AND ADMINISTRATION INTERVENTIONS AT THE CEO ROUNDTABLE (CEOrt) Hyatt Regency Dar es Salaam. Harry M. Kitillya November 2013

SCOPE 1.0 TRA 4TH CORPORATE PLAN 2.0 TRA CP4 COMPLIANCE MANAGEMENT SCHEME 3.0 COLLABORATION WITH PRIVATE SECTOR 4.0 ENGAGING THE SMALL ENTERPRISES 5.0 COUNTER-PRODUCTIVENESS OF NEW TAXES 6.0 CHALLENGES AND OPPORTUNITIES AS TANZANIA MOVES INTO GAS ECONOMY 7.0 ADDITIONAL MATTERS RELEVANT TO THE PRIVATE SECTOR 8.0 CONCLUSION  

2.0 TRA 4th Corporate Plan TRA has matured from a tax administration that provides tax type services for revenue collection to an efficient organization that delivers one stop shop services for all types of taxes The TRA operations are guided by Fiver-Year Corporate Plans and we are now implementing the fourth Plan 2013/14-2017/18 (CP4).

2.0 Fourth Corporate Plan Overview The CP4 is built on achievements gained in CP3 and the desire to address challenges for continual improvement The strategic focus of the Fourth Corporate Plan is summarised in its Vision, Mission and Core Values.

2.0 Fourth Corporate Plan Overview cont’d Mission, Vision, Core Values Vision: “To Increase revenue to GDP ratio to 19.9% by 2018” Improve efficiency Widen the tax net: (informal sector, specialized sectors – mining, oil, gas telecom, tourism, construction, real estate, financial sector) Mission Statement: “We make it easy to pay tax and make lives better” Ensure simplified and transparent processes Easy access to services Increased compliance hence Increased revenue collection Core Values: Accountability – organisation that values and promotes accountability Integrity – fair and honest in dealings with stakeholders Professionalism – apply law fairly and consistently using our knowledge

2.0 Fourth Corporate Plan Overview cont’d Strategic Themes: common direction to achieve objectives Convenience: Deliver cost efficient, consistent and reliable taxpayer services Streamlining of processes; automation; self service options * Req: A culture and practice of efficiency, transparency & accountability Compliance: Taxpayer segmentation for optimal resource allocation based on risk Comprehensive taxpayer compliance strategy; service & education pgms * Req: A culture of high quality service delivery Continual Improvement: TRA is a dynamic organisation, always changing for the better New ideas, innovation, sharing of information to improve performance * Req: A culture that is receptive to change

2.0 Fourth Corporate Plan Overview cont’d Strategic Objectives Perspective Strategic Objectives Financial Improve operational efficiency Increase domestic revenue contribution Customer To be a prompt, technology enabled proactive partner Process Simplify registration, assessment and payment to increase self-service. Promote prompt clearance to improve trade facilitation Enable administrative and policy improvement Drive effectiveness in collection and accounting, audit and investigation, objections Promote segment focused education and service to drive voluntary compliance Learning & Innovation Improve strategic Human resource capacity Develop culture that drives performance, innovation, collaboration and leadership Increase ICT outreach and availability Enhance good governance capability

2.1 BALANCED PERSPECTIVES – Cause & Effect TRA CP4 Financial “If we succeed, how will we look to our stakeholders?” EFFECT Customer “To achieve our vision, how must we look to our taxpayers?” Process “To satisfy our taxpayers, at which processes must we excel?” CAUSE Learning & Innovation “To achieve our vision, how must TRA learn & improve?”

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2.2 Developing Compliance Programme… Taxpayer Behavior Strategy Response The Strategy Level 1: Willing to Comply CP4 Theme: Convenience Differentiated Service Offering Automation and Self Service Environment Move from Gate Keeper to Risk Manager Level 2: Trying to Comply CP4 Theme: Compliance Taxpayer Education Reduce Administrative Burden Understand the taxpayer business and advise Level 3: Do not Comply CP4 Theme: Continue Improvement 360 View: Holistic view leading to early detection Empower our people with tools to perform at their peak Use of 3rd party data to uncover non compliance Routine Audits Level 4: Decided not to Comply Referral to Tax investigation Use of the strongest arm of the law Referral to other law enforcement Decided not to Comply Use Enforcement Strategy Do not Comply Deter by Detection Trying to Comply Levels of Compliance Help to Comply Willing to Comply Make it easy Registration Declaration Areas of Compliance Filing Payment

3.0 Collaboration with Private Sector Provision of quality service and building workable partnership with the taxpayers has been an ultimate goal of TRA’s major reforms

3.0 Collaboration with Private Sector cont’d Interventions taken to institute a tax administration that collects Government revenue efficiently and effectively includes, Introduction of One-Stop Centers and self-assessment system Introduction of electronic lodgments of customs entries and tax returns; Electronic payments of taxes through ASYBANK and mobile phones; Introduction of Taxpayer Service Centers in Dar es Salaam Tax Regions; Implementation of Customs Post clearance Audit; Trade facilitation reduction of clearance time on imports; Establishment of One Stop Border Posts

3.0 Collaboration with Private Sector cont’d TRA has developed a Taxpayers’ Charter, TRA also undertakes Taxpayers’ Perception Survey and Stakeholders’ Forum, A call center is now fully operational The commitment of TRA to ensure inclusiveness is articulated in its fourth five-year Corporate Plan

4.0 Engaging the Small Enterprises Small businesses are not major source of revenue for governments. MSEs in Tanzania account 61 percent of the taxpayer population and generates less than 2 percent of total domestic taxes. Small business taxation is instrumental to facilitating MSEs’ participation in the formal economy Presumptive taxation is the most appropriate method of tax administration for specific small business due to inability to comply with complicated tax statutes

4.0 Engaging the Small Enterprises cont’d In Tanzania, the presumptive income tax was first introduced on July 1, 2000 as means to pull the informal sector in the tax net. Firstly, to reach out to those not reachable through the formal Personal Income Tax (PIT) Secondly, to institute in-built attributes to motivate operators under the Presumptive Scheme to graduate into the preferred tax system.

4.0 Engaging the Small Enterprises cont’d TRA is implementing the Block Management System, (BMS). Tax Officers, from compliance and enforcement sections have been allocated to To registering all traders within the blocks, To collect all types of taxes and manage tax debts To provide taxpayer services Focus in CP4 on Formalization of the Informal Sector benefit from the enhanced identification of persons that the National IDs will embed. Strengthen Block Management System Continual improvement in presumptive taxation scheme

5.0 Counter-Productiveness of New Taxes The Tanzania Revenue Authority Act, Cap 299 established the TRA as a central board to assess, collect and account for all Central Government revenue and administer and give effect to the laws relating to such revenue. The main mandate of the Tanzania Revenue Authority is not tax policy formulation, but tax policy implementation. TRA is an advisor of the Ministry of Finance on fiscal policy through the Tanzania Revenue Authority’s Board.

5.0 Counter-Productiveness of New Taxes cont’d TRA’s advice on tax policy is implemented through consultative processes and passes through the Task Force on tax policy reform, whose representation includes the private sector. The rationale behind the introduction of three most contested reforms, namely withholding tax on services, excise duty on telecommunication SIM Card and Excise Duty on money transfer was in essence to increase Government revenue to finance the provision of social services. Two of the reforms are in the courts of law and it probably a wise idea for me not to continue putting opinions on it.

6.0 Challenges and Opportunities as Tanzania moves into Gas Economy The discovered reserves of gas are likely to place Tanzanian economy to higher levels of development than it is now. The country need it for power generation and revenue to bridge the budget gap Currently Tanzania does not have specific tax regime for oil and gas rather it uses existing tax laws to tax the oil and gas industry

6.0 Challenges and Opportunities as Tanzania moves into Gas Economy cont’d Since Oil and gas is a relatively new venture, Tanzania is faced with a number of challenges including. Putting in place a modern regulatory and taxation framework for the industry to be sustainable. Currently the industry is dominated by foreign experienced companies with high level technology and long-standing experience in the industry including tax planning Overcoming these challenges will have a significant bearing for Tanzanians to realize the benefits of their natural resources for their development.

Additional Matters Those Are Topical and Relevant to the Private Sector This is such a grey area and the list may be endless. I would like to mentions just one or two issues of interest We are rewriting the VAT Law with the intentions to align it with international best practice. The Government also expects to enact the Tax Administration Act, which harmonizes in one book all the administrative codes and procedures

CONCLUSION As for the Tanzania Revenue Authority, I wish, on my own behalf and on TRA’s behalf, to assure you that we are committed to creating a workable partnership with the private sector in revenue administration, and your inputs towards achieving this commitment together are most welcome and most valued.

Thank you once again for giving me an opportunity to speak at this roundtable dialogue.