“No Longer!” - Trade unions in Tanzania take a stand to end tax injustice

Organized by PSI for trade unions, Civil Society Organizations (CSOs), and student and youth groups in the country, the meeting concluded that Tanzania should no longer lose out on large amounts of tax revenue due to tax avoidance and harmful tax incentives handed to multinational companies - even more taking into account that in recent years corporate tax rates and tax contributions to national revenue have decreased while the taxes collected from individuals as personal income tax has increased, both at the global and national levels.

The meeting also revealed that Tanzania loses significant amounts of funds due to harmful tax incentives to multinational companies as well as through illicit financial flows with an estimated annual loss of US$ 531.5m recorded by the country due to tax incentives alone.

“Whereas the meeting applauds and appreciate the efforts of Tanzania Revenue Authority (TRA) in collecting the required taxes, there is need for the Government to enhance the capacity of TRA, in terms of technical support and increased human resource. We believe that the government of Tanzania can collect more revenue by reducing unnecessary tax incentives to multinational companies,” states a press statement issued at the end of the meeting.

It was also observed that there is inadequate public information on the tax affairs of companies operating in Tanzania especially multinational companies - a problem which is made worse by the challenge of financial secrecy.

It was also stressed that some of Tanzania’s tax treaties provisions limits the country’s ability to tax some multinational companies within the context of tax laws enacted in 2004.

Trade Union Tax Justice Platform

In the last five years, PSI has focused its fight against corporate theft and the call to an end to illicit financial flows out of the continent of Africa in the areas of education and awareness raising among its affiliates, as well as CSOs. This aims to make more effective, public service development and delivery, achievement of the targets of the Sustainable Development Goals (SDGs), and the fight against privatization of public services such as water, health, education and energy.

In 2017, PSI held a successful workshop in Tanzania where critical recommendations were made in relation to launching a successful campaign on Tax Justice which will allow for active participation of trade union members in the Tanzania Tax Justice Coalition, and with the input of PSI’s NCC, bring together the thirteen (13) trade unions in the country under a single umbrella to establish a Trade Union Tax Justice Platform.

Recommendations

PSI affiliate unions (TALGWU, TUGHE, RAAWU and TUICO)], the Trade Union Congress of Tanzania (TUCTA), the East African Trade Union Confederation (EATUC), Civil Society Organizations, such as Open Mind Tanzania (OMT), Tanzania Coalition on Debt and Development (TCDD), Inter University Tax Justice Network Forum (IUTJNF) and Pan African Centre for Policy Studies (PACPS)] suggest the Tanzanian government to take the following actions:

Tax Incentives

• Considering that Tanzania is losing a lot of money due to tax incentives, there is a need for the Government to make public the current tax incentives - including discretionary incentives - on the TRA website. Based on this information, there should be a review of existing statutory tax incentives through cost benefit analysis with an aim of eliminating harmful incentives;
• We further call upon the Government to halt further discretionary tax incentives until an audit is undertaken to assess and justify their benefits to the economy;
• All tax incentives should be subject to public scrutiny including by parliament, trade unions, civil societies, media and public participation;
• Special Economic Zones: The Government proposed in its last financial year’s budget to increase the number of special economic zones (SEZs);
• Review the Special Economic Zones (SEZs) through an independent cost benefit analysis and discontinue the SEZs that are not beneficial to Tanzania;
• Review all existing statutory tax incentives through a cost-benefit analysis, and remove those that are not beneficial;
• List all current tax incentives – including discretionary tax incentives – on the Tanzania Revenue Authority (TRA) website;
• Subject all tax incentives – including statutory and discretionary incentives and those in SEZs – to public scrutiny; including the parliament, Trade Unions, media, civil society and citizens;
• Do not hand out any further discretionary tax incentives to individual companies.

• Create a public policy framework stating the intended objectives with Tanzania’s tax treaty networks;
• Ensure all tax treaties allow Tanzania to tax Capital Gains Tax on all capital gains of multinationals;
• Do not negotiate any tax treaties with tax havens such as Mauritius, the Seychelles or the Netherlands.

• Tanzania to proactively push for a Global Tax Body rather than the Organization for Economic Co-operation and Development (OECD) setting international tax rules;
• Tanzania to negotiate a regional minimum effective corporate income tax rate to avoid tax competition.

Transparency

• Tanzania to proactively push for all multinationals operating in Tanzania having to file a country-by-country report with the TRA;
• Tanzania should introduce a public register of beneficial ownership covering all companies and trusts.

Enforcement

• The TRA must receive additional resourcing – in terms of staff, training and IT infrastructure. This will bring in much more money than it will cost.