Tax exemptions are granted to companies and individuals to promote further investment in key strategic areas. If not managed properly however, tax exemption can be a huge liability to the government which ends up missing out on billions of potential revenue at the benefit of a few individuals and corporations. Therefore, to prevent abuse of tax exemptions, an important criteria should be that all tax exemptions should be made public. Unfortunately this is not standard practice in Tanzania, where the government dished out tax exemptions valued at 2.5% of GDP (700 Billion Tshs in 2010) with the aim of cutting this down to 1% . Industries such as the mining and telecommunications sector are key beneficiaries of tax exemptions as the government tries to boost foreign direct investments in the country.
The OGP commitment regarding tax exemption is as follows:
#1.8 Publish quarterly all Tax Exemptions granted in Health, Education and Water related sectors on the Ministry of Finance (MOF) website, in machine readable format.
This is a positive first step towards encouraging more transparency when it comes to tax exemption. However, we feel this sectors are not considered to be controversial recipients of tax breaks and no one would argue against attracting investment in health, education and water systems. Therefore the government has to be more proactive in tackling those sectors that for years have been benefiting from unnecessary tax exemptions most notably the mining, telecommunications and hotel industries.
Despite this fact, even tax breaks in sectors outlined in the commitment have not been posted on the Ministry of Finance website to date and therefore we judge this PROMISE BROKEN.
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