Our friends in the government have been stepping up efforts to collect taxes, and I applaud the intent but critical of the means. It is undeniable that many of us know that our people are sometimes overtaxed while other areas of taxation are undertaxed.
I am proposing just taxation on large land holdings. The Tanzania Revenue Authority (TRA) has been trumpeting about expanding the tax base, but its efforts have targeted the same sources of taxation.
This article recommends large tracts of land taxation to achieve the much-sought tax goal of widening the tax base.
What is the point of slapping the same areas of taxation with a higher tax burden, knowing “Punda Amechoka?” If you look at operation “Funga Maduka,” the citizens speak loudly and clearly, but who listens?
Our small businesses are hand-to-mouth, so why is TRA harassing us with more taxes that threaten our ability to put food on the table? We are making no profit, and if we do the math that includes paying ourselves a living salary, we are losing money. So, why tax a business entity that is losing money?
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TRA laughs and mocks us, responding to our collective agony with the usual cliché: if you cannot run your business profitably, why don’t you close your business entity?
We answer that we cannot close the shop because we have a long-term business plan that may take ten to twenty years to fruition from the day we started it.
TRA officials who have never managed an SME tend not to have an insider’s knowledge of small businesses’ struggles. So, they knuckle their fists and come after us with closure notifications or else pay up.
Our response is to abide by their closure notices, but when we do, we are regarded at best as economic saboteurs and at worst as anti-establishment figures.
Either way, we are guilty as charged, and no amount of extenuating evidence can bail us out. The police pay regular visits in our closed shops and ferret out informal leaders for further action. In some situations, they rely upon sleazy snitches who exploit that opportunity to get even with those they dislike for one reason or another.
Then, the perceived informal leaders are harassed, beaten and asked to report at the nearby police station. When a business is tainted with excessive force, it ceases being a business but assumes the status of an open prison.
So, since no more taxes can realistically be squeezed from us, we must reach a point where we sit together and brainstorm how best to arrest the situation.
SMEs across the board support government efforts to widen the tax base while not tampering with tax payment compliance rates. Ironically, putting the police on our backs undermines the twin goals of maximization of tax collections.
After consulting with small businesses, I have drawn several conclusions. An annual fixed tax system replaces the need to issue receipts and have customers collect them for goods and services worth less than 10 million Tanzanian shillings.
I reason that while Tanzanian money may look impressive in figures, it is not in dollar terms. Second, enforcement costs are just too high. Third, we have better avenues to compensate through large new tracts of land taxes, as I will elaborate soon.
Plans and implementations have been made to lease large tracts of land to foreign entities for agribusiness. This will involve evictions or curtailment of traditional land users’ access to the same lands.
The compensation packages are too low, and those on the receiving end will struggle to recover. However, another innovative way is to lease large land without condemning our people to abject poverty.
We have more than 8 million acres of large tracts of land in private hands. Since the tax regime is too low, most of this land is idle and does not attract penalties.
Our land leases and development issuance within three years after acquisition are faulty. We need to tax idle land to encourage its development.
This will work to widen the tax base and lower the pressure to tax the small guys. My proposition is one thousand dollars per acre per annum for whoever owns more than 50 acres of land, irrespective of citizenship.
This will bring an estimated 8 billion US dollars annually, almost a quarter of the annual budget. Those who fail to pay the yearly large land ownership fees of USD 1,000 per year per acre in three years will automatically lose their titles, which will be auctioned in an open market.
This strategy will prune most bogus investors who hold large tracts of land. These investors are mere land speculators who do not intend to develop the land but patiently wait to sell it to prospective investors.
With such a windfall income, large landowners will be pressured to develop their land lest they fail to meet their annual tax fees and lose their land.
We may even exempt local SME owners from paying taxes and use part of this income to shield elders over 65 by paying them at least 100,000/= per month.
Records indicate that a country that cares for its senior citizens is doing well. The economy tends to be robust, generating multiplier effects arising from increased money circulation.
With the tax burden removed from society’s most vulnerable members, we can trust them to begin earnestly to embark on “primitive accumulation” – a key plank in community development.
Critics will dismiss this initiative as unworkable, but the good news is that even if some developers run away, we can rest assured that Tanzanian land is not that cheap.
We will stop them from laughing at us as stupid and lacking creativity, and they will begin to take us seriously. My proposal covers all lands regardless of their usage.
Whether mining, farming, hunting, hoteling, schooling or any activity that has taken 50 acres, they should pay us USD 1,000 per acre per annum. Failure to adhere to this will lead to forfeiture within three years of default.
Can TRA explain to us why this proposal cannot be taken to Parliament and enacted immediately to release the poor from taxation, put our large tracts into commercial exploitation, and discourage the mushrooming of idle land that is costing us too much?
