The Blind Spot In A Sharing Economy: Tax Collection

This is a follow up article and new information eTN received in regard to our two articles:

Top 10 countries to invest in Africa: Egypt number one

Tanzania: Not a place to invest in Africa

The evaluation by N. Y. Hamisi of Dar es Salaam, Tanzania, states:

Come one come all: Tanzania is among the best place to Invest in Africa

The article “Tanzania Not a place to invest in Africa “by Juergen T Steinmetz, which appeared on eTN website on September 18, 2017 cannot be left unchallenged. It is misleading, and propagating false opinion on War against Corruption that and looting of Natural Resources. The efforts being headed by the 5th President of the United Republic of Tanzania, Hon. Dr. John P. Magufuli. The following is own rebuke on Juergen T Steinmetz article.

A. It was alleged that Investors are leaving in droves. Contact companies like Worldwide Movers to back this up.

It is not true. Genuine Investors are continuing with their investments. Clean Investors, who know what they is looking for, and have struck the balance (not looting), between investment and profit sharing, are still there.

We have investors who have been in Tanzania for a decade now, but to date, they have never paid anything including Revenue Tax to the Government. Their balance books are reading negative (to have made losses) in Tanzania, but positive in their Countries. Their Board Members, have been sharing dividends year after year.

Definitely, such shoddy and corrupt investors will suffocate in this situation and definitely, they are destined to shut down and leave the country. Investors who just emanated to loot, with nothing to offer in Tanzania, will definitely run away.

B. Many of the banks are on the verge of collapse due to a high level of nonperforming loans – the economy has tanked and people can’t pay the loans back. Several have already collapsed. Annual accounts/statements showing this have been pulled from websites.

Yes, it is not surprising to hear that. Many Commercial Banks, are on the verge of collapsing due to high level of nonperforming loans. We all know about things like money laundering business and associated problems worldwide. In Africa, including Tanzania, we also know the way government money system were being paralysed at the expenses of private and commercial banks. Now the Central Bank of Tanzania have intensified its supervisory systems. Many Banks were operated at Government’s cost, which is an overhead to a common man. In turn, such overheads were swallowed by poor Tanzanians. Why should it continue this way? All banks which were operating behind government’s feet’s are destined to close. Commercial Banks must assess and evaluate their mode of operandi, such as loan systems, interest rates as to come up with affordable interest rates and simulate businesses in the country. That is what we expect from commercial banks, not to operate in parallel as rivals to the Central Banks.

C. Most, if not all, sectors are reporting a massive reduction in turnover and profits. Dealers in building supplies (a good indicator of growth) are reporting business as halved!

Yes, there might be massive reduction in turnover and profits if such businesses were under government’s feet without having own roots and impacts to the common man in the street and villages. No country can claim to have developed because of building constructions. Come 2025, we are destined to make this country more of Industry and not Buildings. Actually, substantial infrastructure constructions were being funded by the Government. Policy changes from buildings to industries constructions has changed the playing field. Players must align themselves in a new industrial pitch. A country cannot develop by providing services only without tangible production.

D. Mining companies are being targeted with extremely questionable commodity value assessments and subsequent extortionate bills for tax (search Acacia). They are closing and retrenching workers.

One of the highly misleading allegation in this article is about Mining companies. We have witnessed foreign masterminded, sponsored, and spearheaded cheating of highest odder in the Mining Industry. Since colonial time, even after 1961 when we got independency, to date; CHEATING and THEFT have been going on. There have been four serious investigations this year, and one airport seizure, all with professionally scientific and physical proofs, showing how this mining sector has been used to loot the country’s wealth. Dubious contracts were signed, and several time amended. Currently, high level negotiation between government and investors is underway. What are you talking Mr Juergen T Steinmetz??

E. The tea industry (Unilever, Mufindi Tea Company etc) hasn’t made a profit in several years, resulting in large-scale retrenchments (thousands of workers over the last two years), company sale and bank repossession.

For same reasons, either high operating cost or climate change has affected agriculture industries including Tea, Cotton, and Coffee and Cashewnut factories. We don’t expect the President to control rains. A good thing here is that these are crops with strong roots with common farmers. With improved weather, things are destined to improve. On the same token someone may wonder, the price of tea or coffee or cashew has not collapsed but workers are being retrenched!

F. The tourism industry is experiencing similar difficulties in being levied an unsustainable level of regulatory compliance and tax burden. Many, especially in southern Tanzania, are being sold.

This is one of the area where tax evasions were at rampant. Not surprising to see such trend after they have encountered drastic tax collection measures. However, with proper tax collections from few tourist coming in so far, revenue has increased. So one can see how the sector were being operated. A good thing of this Government, is that those living suspect, once found guilty, will be brought to justice.

G. The value of construction timber/forestry has also collapsed because people aren’t building, and would be even worse had it not been for a questionable decision to move thousands of government workers to Dodoma. Pine tree blocks that would sell for Tsh13m-16m were subsequently being traded at Tsh2-3m! Private forestry operators such as Green Resources are in trouble and retrenching.

There cannot be collapse of construction timbers/forestry. There are stern and sting control measures all over the place. While we are crying climate changes, our forests were being continuously looted. Now all forest are under control and no more illegal forest harvests. The president has brought in the government sense of self-control, discipline and responsibility. This is good for the country. Besides most of timber and forestry products were being exported to western countries and Asia but there was nothing to show for Tanzania in revenue and taxes.

H. Industrial exports have declined these last months/year.

This is one of the allegation which are just aired without researched statistics.

I. Investors are being harassed and extorted left right and center. The Tourism sector is paying 56 or so DIFFERENT TYPES of taxes and fees. The revenue authority district and regional managers are being told to raise revenue on a shrinking economy whatever the cost – driving more to close businesses in record numbers.

This is another unfound allegation. Yes, we all know that no more tax evasions. You Juergen T Steinmetz, cannot evade tax in your country. Why Investors in Tanzania should do so? Closure of business are due to stern tax collection measures, which were not used to and nothing else.

J. Work permits are being rejected or delayed for months in an anti-foreigner angle, so management of investments/projects is getting impossible

There are clear laws governing this. Can I just come in your country and get a work permit in a day? What you are not practicing elsewhere why practice that in Tanzania? Some of professional work permit must undergo scrutiny by statutory bodies. Just to ensure that the country really need that expert. We have seen non experts applying for professional permits. This is not allowed and cannot be left to continue. We have a lot of graduates waiting for their employment chances to come.

K. Political opposition leaders are being shot in the streets (search Tindu Lissu), being arrested on trumped-up charges and passing through police stations like a merry go round. Any public of social media statements are deemed illegal and there are allegedly dozens in jail and court for Facebook posts etc. Their houses and offices are being bombed or set alight. Political parties are not being permitted to organize meetings/rallies. Parliament has been muzzled – their live TV broadcast cut off and MPs are being arrested regularly for charges of sedition etc.

All criminal offences are being investigated by the responsible authority. Dozens of people have been killed in Lindi and Mtwara Regions. That includes a Platoon of Police officers, all killed in uniform in one incident. Police posts have been attacked and arms robbed. I guess you turned a blind eye on such incidents. Regarding Political rallies, in Tanzania!! We have seen how elections are being held in your countries. We have seen how rallies are being carried and encountered in your countries. Why Tanzania should not regulate and govern own affaires? Is live TV anything to do with economy or democracy? How many countries in the world have live parliament TV? Is this an election agenda? As far as Tanzanians are concerned, anybody going against the law will be arrested and charged regardless of political affiliation. As I am writing this, there are arrests being made regardless of gender and political party affiliations and all waiting for the law to take its path.

L. The government isn’t listening to the pleas of the private sector – just bulldozing back to the socialist policies that Nyerere collapsed the economy with last time.

There is no conflict between private sector and the government. What is clear, is that there are always constant discussions. We in the country, knows where the critical path is. Let’s Tanzanians speak for themselves about where they want to go. Businesses were used to tax evasion schemes whose loopholes are being shut. The super profits that were being enjoyed by few are no longer a norm. Players who were used to it had influence must complain.

M. And against this backdrop, the article states that Tanzania went up two places?? What planet are they from?!

Take it as another opinion. However, there are many indicators showing that the country is undergoing economic and political transformation. One’s opinion should not pre-empt efforts which are ongoing.

What other indicators would the writers look at?!!

Many indicators shows that president is highly supported and we are doing better than yesterday. We also understand that the changes that Tanzania is demanding especially in the mining sector are unique in Africa and are echoing in most western capitals. The worry for these multinational companies who do not believe in fair play when it comes to Africa, is whether this will become a trend. The same mining companies do a 49/50 sharing in Botswana, why 5/95 in Tanzania? In brief, I see hypocrisy on your article. Most of western countries say African leaders are too corrupt and are not responsive to their citizens need but you are defending western companies to loot and go scot free. We know a few people were paid to have such tilted contracts. It amazes me that even when companies are red handed caught there is an imaginable resistance and denials to such practices. If these companies were not making profits, why would their stocks drop and why would they want to continue doing the same business in a hostile environment? If it does not amaze you then the Berlin 1884 mentality still prevails.

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