Tanzania's Tax Structure

Introduction : Taxation is one of the oldest functions of a government in running government affairs. Apart from the cost of running the government, normally there are some services which have to be met by the state. Imperatively government have to provide social services, maintain law and order, ensure defense and a horde of other undertakings which the free market cannot provide or which the state feels are better provided by itself or it's agencies.

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Taxation Questions and Answers

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2015/16 Tax Laws Amendments

Amendments to the Income Tax Act
Taxation of Individuals : The government aims at progressively reduce the marginal tax rate for individuals to a single digit and it does so by reducing the rate annually from 14% in 2010/11 to 11% 2015/16. There is no change made on the tax bands but the marginal tax rate has been reduced from 12 percent to 11 percent. This results in monthly tax savings of Tshs 1,900 for every individual.

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Tanzanian Tax Laws

Tanzania has over 10 different Acts of parliament governing the country's taxation system. These laws are all being administered by the Tanzania Revenue Authority. Included herein below are the various Acts as updated by the respective authorities. All efforts have been made to get the most current updated version of the respective Acts and it is advised that you download and read them thoroughly in order to comprehend the country's taxation system and the respective requirements.

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Tax Planning

Tax Planning is closely related to tax avoidance and evasion. Therefore a discussion on tax planning must inevitably begin from the definition and distinction between tax avoidance and evasion. As discussed earlier, tax avoidance is the legal way to minimize tax liability without contravention of the law in order to minimize tax liability. Tax planning is the art and technique of careful structuring one’s future business transactions in order to realize tax savings (minimization of tax liability) but without contravention of the tax laws.

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Tax Avoidance and Evasion

Introduction: The problem of tax avoidance and evasion is common in all tax systems. All tax authorities have to contend and live with the problem. While the evil practice cannot be eliminated it can only be minimized because it is planned and undertaken in secrecy by the taxpayer and sometimes with the cooperation of tax consultant and auditor. Otherwise the tax authorities would have pre-emptied any tax evasion and avoidance practices. A high degree of tax avoidance and evasion

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Residence and source

Individuals - Under the Income Tax Act, whether or not you are resident in United Republic of Tanzania (URT) does not depend on residence permit or documentation, but on the following. If you meet any of the following conditions, you are a Tanzanian resident for a year of income.

(i) You have a permanent home in the URT and you are present during any part of the year of income; (ii) You are present in the URT during the year of income for a period of or periods amounting in aggregate to 183 days or more;

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Introduction to Tax

A tax is a compulsory contribution from a person to the state to defray the expenses incurred in the common interest of all without any reference to the special benefits conferred. It is a compulsory contribution or payment for the support of governmental or other public purposes.

=> De Marco defines tax as “a share of the income of citizens which the state appropriates in order to procure for itself the means necessary for the production of general public services.” This implies that Tax shall equal public services.

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Characteristics of Tax

It is a compulsory charge. It is not a donation, or a gift to the government. It is legally imposed and non-compliance results into statutory, civil and criminal penalties. It is not a voluntary contribution.

(i) Only the government (sovereign state) has power to levy taxes. So tax differ from other charges which can be charged by even churches, clubs, political parties etc.
(ii) Both citizens and non-citizens may be liable to pay tax.
(iii) No "quid-pro-quo" relationship in taxation.

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International Double Taxation

Introduction - Many countries have developed competitive investment incentive packages in order to attract both local and foreign capital. With the increasing liberalization of international trade and investment policies and cooperation among nations, the income arising from international transactions is likely to suffer international double taxation.

It is therefore necessary to formulate appropriate taxation and physical

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Types of Taxes in Tanzania

Basically made up of direct taxes and indirect taxes. The ministry of finance determines tax structure and classification in Tanzania. Direct Taxes are mainly taxes on income while indirect taxes are on consumption and international trade.

They include (i) Corporate tax – 30% of all companies (whether resident or none resident) carrying on a business in Tanzania. (ii) Individual Income Tax – non-corporate resident tax payers including sole proprietors

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Role of Taxation

To raise revenue for financing public expenditure.

The revenue is for providing (a) public goods (i) goods with zero marginal cost i.e. no extra cost is incurred in supplying the goods to more than one person. (ii) goods that no individual can be excluded from consuming them. (iii) goods that are consumed equally by the members of the society. Example of such goods is the national defense), (b) merit goods with the aim of

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General Tax Classifications

Tax can be classified according by tax base; according to tax incidence shiftability; according to unit or ad-valorem based taxes; or according to how the tax burden is distributed among the tax payers.

1. Tax Base: (i) Classifying tax according to what is being taxed. Here we have taxes such as income tax (eg. corporate tax, PAYE etc) and Capital (capital gain tax, property tax, etc); (ii) This classification is good for economic analysis but sometimes

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Principles of Taxation

Principles of Taxation are basic concepts by which a government is meant to be guided in designing and implementing an equitable taxation regime. These include:

=> Adequacy: taxes should be just-enough to generate revenue required for provision of essential public services.
=> Broad Basing: taxes should be spread over as wide as possible section of the population, or sectors of economy, to minimize the individual tax burden.

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Tanzania Tax Administration

The United Republic of Tanzania (URT) uses the widely used three tier tax administration structure. The structure is comprised of:

=> Central Government Taxes Administration vested on Tanzania Revenue Authority (TRA),
=> Zanzibar’s Domestic Consumption Taxes Administration vested on Zanzibar Revenue Board (ZRB),
=> Local Government Taxes Administration vested on Local Authorities. These include city, municipal, town, ward and village councils.

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