Unfair Taxation or Necessary Evil? The Kariakoo-TRA Conflict: Where Are We Messing Up?

Share this article


Kariakoo retailers downed their tools in protest of unfair taxation, militant style of collecting taxes and refusal of the TRA to refund what they consider overdue VAT refund. This article explores positions espoused by the two parties, why the issue recurs and whether the two sides can see eye to eye over the dispute.

The Tanzania Revenue Authority (TRA) tax collection methods have reignited the anger of her clients, and the bad blood between the two sides refuses to subside. TRA’s relationship with taxpayers has always been more of tolerating each other but during the reign of the late President Dr John Pombe Magufuli, the relationship of the two sides fell apart.

Retailers complained that the TRA had formed and unleashed “Kikosi Kazi” that were visiting their business premises demanding cash or threatening to close their accounts. Sometimes, the business owners were threatened with long jail terms if they did not part with large sums of money.

Behind the scenes, these tax-collecting militias carried guns with live ammunition and papers that, once signed by business owners, authorized the TRA to withdraw large sums of money from their bank accounts. Refusal to comply might lead to criminal proceedings for economic sabotage and related non-bailable charges.

The contemplation of staying behind bars for a crime the business owners knew they did not commit compelled them to surrender whatever was extorted and move on. It was an evil hour where many businesses opted to silently close shop to avoid further losses from the overzealous tax collector. There was an apprehensive code of silence against retaliation from the authorities.

Read Related: Tax Revolt Brewing: Tanzanian Citizens Challenge Government Over Unjust Levies

During the 2020 campaigns and after the death of Dr. Magufuli, the general public became more aware of these strong-arm methods to collect taxes. During the campaigns, Chadema presidential aspirant, Tundu Lissu, expounded on how business owners were forced to pay taxes through intimidation, confinement, criminal proceedings, and loss of business licenses.

During the criminal proceedings of former DC of Arumeru Lengai Ole Sabaya, the public became aware of allegations of invidious tax collections. Court records detailed extrajudicial abductions, pecuniary extortions, and regional administrators turning tax collection into personal money-minting ATMs. Key witnesses complained about these practices. Despite these serious allegations, Mr. Sabaya was acquitted on all charges by the highest court in the land due to a lack of evidence.

That leaves the allegations unsubstantiated, but since taxpayers continue to raise the same complaints, they gain credibility, albeit not directly linked to the Sabaya case. Lack of evidence doesn’t mean the allegations were concocted; it means the accused wasn’t tied to them through court proceedings. This distinction is important to consider the allegations seriously and address the underlying issues. As the Swahili proverb goes, “Usipoziba ufa utajenga ukuta,” meaning if you don’t fix the crack, you’ll have to build a wall.

The Bureau de Change in Arusha were also forced by the Bank of Tanzania (BoT), the Central Bank of Tanzania, to close for reasons that appeared tax-related but were suspected to be politically motivated. My investigations suggested that some opposition figures in Chadema had ownership or ties to these currency exchange shops. The Magufuli administration believed that profits from these businesses were funding opposition activities, leading to their closure as a means to cut off financial support for the opposition.

Hence, closing those shops was presumed to sever the financial support for the opposition. The presence of armed forces in tourist areas caused concern, potentially intimidating tourists and leading to their abrupt departure.

The full impact on the tourism industry due to the closure of Arusha Bureau de Change shops may never be fully understood, but it was significantly shaken. President Samia Suluhu Hassan rectified this soon after taking office, restoring the status quo. However, compensation for the losses and damages inflicted on these businesses remains a matter of negotiation.

Taxpayers Perennial Complaints Against the TRA 

What Kariakoo vendors are agitating for is half true and half not. The protagonists have legitimate positions but are also overreaching to maximize their gains. Tanzanian business is choked by numerous, repetitive, and extortionate tax regimes, a fact that needs no verification.

Names of taxes may differ, and tax collectors may hail from the central government or regional administration, all targeting the same business premises. Calls for a single tax-collecting authority were half-heartedly heeded but later abandoned. Regional administration even charges for business banners near the premises, as if such businesses are unregistered!

Also, read: Government Targets Non-Religious Organizations with New Tax Scheme

Business operators ask themselves why they must pay taxes on business banners when they have already paid business registration fees. TRA comes in with an annual estimate of the business’s potential revenue, which, although often fictitious, is considered real and enforceable by TRA. From this estimate, TRA determines a minimum tax that must be paid to obtain the TRA certificate of clearance.

I remember a friend who had just opened a small supermarket. Before even one client visited, four TRA SUVs arrived, began an investigation, and served him a letter to appear at their offices. We were shocked! Instead of focusing on his new business, my friend had to close his supermarket, which was still trying to advertise itself.

The entire demeanor of the TRA was hostile, as if opening a new business was committing a crime! Sometimes, I wonder whether one of the qualifications to work at the TRA should be having been a former business person to understand the challenges and opportunities of running a business entity.

Part of the problem with the TRA is the lack of understanding of what the business community goes through to start and sustain a business. Their attitude assumes that these businesses generate plenty of cash. TRA looks at capital investment and draws unfounded conclusions that this business must generate huge amounts of cash. What they fail to grasp is that the two parameters are unrelated.

Strikingly, capital investment may run into losses because the market is not there or needs time to be created through advertising or product dumping to encourage new consumption habits. Curiously, when foreigners register their businesses through the Tanzania Investment Centre (TIC), they are treated with kid gloves, with a grace period of up to five years.

In certain peculiar cases, the same investors change company names to evade taxes and gain access to new tax exemptions, committing tax fraud without incurring any consequences!

The lion’s share of taxpayer complaints is that the rules of tax assessment are ambiguous and foggy. Two tax assessors might come up with different figures, supposedly using the same methodology! This has opened Pandora’s box, where, according to taxpayers, bribes are demanded to lower the figures, creating a so-called win-win situation.

The government is left with the rotten end of the stick, but the tax assessor and the taxpayer accommodate each other through this symbiotic relationship. Failing to appease the tax assessor may lead to foreclosures, tax board appointments, and other troubling measures.

For big businesses that are not hand-to-mouth, such as those involved in mining, paying bribes is often seen as a cost of doing business in a country like Tanzania. For example, a large mining company surrounded by gemstone assessors might collude to underreport the quality of the precious stones, assigning them a lower grade to diminish their true value.

Once the assessors have sealed the boxes containing the gemstones, no one verifies their true value again. This results in the government receiving less revenue, which negatively impacts development funds. Consequently, the burden falls on the very poor, whom the TRA targets.

Business owners are struggling to make ends meet, and if the TRA understood the real issues, they would focus on large businesses where the massive leakages occur. The TRA rarely disputes with big businesses because it is bribed to facilitate the extraction of wealth outside the country. TRA lacks mechanisms to verify what gemstone assessors are doing and trusts them for a reason. Small taxpayers become the TRA’s punching bag to compensate for the losses conveniently overlooked from big taxpayers, which leads to ominous implications.

Kariakoo taxpayers are also not blameless. Their claims for tax refunds often exceed their reported revenues for tax assessment purposes. The reality is one cannot claim more than what they have declared as earned revenue. Kariakoo VAT refunds running into millions per taxpayer seem dubious, likely due to falsified data to cover overtaxing or gain unfair profits.

To curb this, VAT refunds should be eliminated to remove the incentive for tax fraud. Instead, valid VAT refunds should result in tax exemptions rather than cash payouts.

The hostile relationship between TRA and small taxpayers will persist until the TRA devises strategies to fairly tax big taxpayers, potentially exempting small taxpayers from any form of tax.

Until then, we can expect the same cycle: threats of shop closures until demands are met, followed by temporary relief, and later, penalties. This ongoing cycle shows no sign of ending.

A country rich in natural resources should not burden struggling indigenous businesses with taxes. These businesses already grapple with expenses like rent, wages, utilities, storage, and transport costs before even thinking about their own sustenance.

We need more compassion, not chest-thumping, because our survival is at stake!

The author is a Development Administration specialist in Tanzania with over 30 years of practical experience, and has been penning down a number of articles in local printing and digital newspapers for some time now.

4.7 3 votes
Article Rating
Notify of
Inline Feedbacks
View all comments
Leave a comment
scroll to top