Tanzania, a country in East Africa, is currently witnessing significant developments in its economic landscape. The taxation system in Tanzania plays a substantial role in the country’s economic dynamics, particularly for traders operating in markets like Kariakoo. Do you remember the Kariakoo Traders Saga? I guess you do! While taxation is essential for government revenue generation and financing public services, its implementation can sometimes hinder growth and overexploit businesses and tiny traders.
Understanding the taxation systems and their implications is crucial in devising policies that promote sustainable economic growth and support the livelihoods of traders and their communities.
At the same time, the Tanzania Revenue Authority (TRA) launched a campaign to intensify revenue collection in the region. These events shed light on traders’ challenges and opportunities and the government’s efforts to foster economic growth and formalize the trading sector.
The Traders’ Protest in Kariakoo Market
In an unprecedented move, more than a thousand traders in the Kariakoo market kept their stores closed for three consecutive days in protest against a new tax imposed by the government. The traders’ primary concern is the perceived double taxation, as they argue that they are already paying import taxes and should not be subjected to additional tariffs on the same goods once they are in their stores. The protest has drawn attention to the challenges small business owners face in Tanzania.
Rising food prices and transportation expenses have eroded the population’s purchasing power, making it increasingly difficult for traders to maintain profitability. While closing stores signifies discontent, it also reflects a growing demand for more favorable business conditions. The government’s response to the protest has been two-fold. Firstly, it announced a moratorium on collecting the new tax, aiming to ease immediate financial burdens on traders.
Secondly, a 14-member committee comprising government members and traders was formed to address the traders’ concerns and explore viable solutions. The Prime Minister, Kassim Majaliwa, met the traders in a public meeting, emphasizing that the government is attentive to their grievances and committed to finding resolutions.
In parallel to the traders’ protest, the Tanzania Revenue Authority has initiated a campaign to intensify revenue collection in the Kariakoo market. Kariakoo is renowned as the busiest trading center in Dar es Salaam, attracting both local and foreign buyers and sellers. The campaign aims to register all traders, regardless of the size of their businesses, and issue them a
Taxpayer Identification Number (TIN). The campaign’s focal point is encouraging using Electronic Fiscal Devices (EFDs) to ensure that every transaction is recorded and valid receipts are issued after each sale. This move is designed to combat tax evasion, mainly facilitated by informal traders (Machinga) who operate without formal registration.
By formalizing businesses and enforcing tax compliance, the government seeks to enhance revenue collection and pave the way for a more transparent and regulated trading environment.
Impact on the Tanzanian Economy
The traders’ protest and the revenue collection campaign in Kariakoo have significant implications for Tanzania’s economy. The march signifies the pressing need for a balanced taxation approach and economic policies supporting small businesses. As inflation remains contained at 4.3%, the rising costs of food and transportation have strained the population’s purchasing power, impacting local businesses and consumers alike.
On the other hand, the government’s campaign to register traders and promote the use of EFDs reflects its commitment to formalizing the trading sector. The move is expected to enhance revenue collection and provide traders with access to various opportunities and benefits, such as loans and improved business growth prospects. Formalizing businesses will foster a culture of transparency and regulation, contributing to a more stable and resilient economy.
However, High taxation and complex compliance procedures can put considerable strain on the growth and sustainability of businesses in Kariakoo. Small traders, who form the backbone of the market, may struggle to meet their tax obligations and find it challenging to access credit and loans due to their informal status.
Inadequate access to financial resources can hinder business expansion and limit investment in modern technologies, reducing productivity and competitiveness.
And taxes levied on goods and services can directly impact consumers’ purchasing power, reducing demand for products in the market. As traders face higher costs due to tariffs, they may pass on these costs to consumers through higher prices, leading to a decline in consumer spending. Reducing consumer demand can create a vicious cycle of reduced sales and profitability for traders, further hindering economic growth and development.
A Way Toward Resilient Economy
Tanzania’s economic dynamics are witnessing significant shifts and should emphasize the need for a balanced taxation policy that fosters growth while addressing inflationary pressures. Through the moratorium and dialogue, the government’s response demonstrates its willingness to address traders’ concerns and work towards viable solutions.
Simultaneously, the revenue collection campaign seeks to enhance transparency and regulation in the trading sector by formalizing businesses and encouraging tax compliance. By providing traders with a Taxpayer Identification Number (TIN) and promoting Electronic Fiscal Devices (EFDs), the campaign aims to increase revenue collection and create a more stable and resilient economic environment.
In the pursuit of progress, Tanzania stands at a critical juncture where effective policy-making and cooperation between the government and traders can shape the future of its economy. The efforts to strike a balance between revenue generation and supporting business growth will be pivotal in driving Tanzania’s economic development and fostering a thriving and inclusive market for the benefit of all its citizens.
Read more business insights here.
