Petty traders in Mtwara, Tanzania are starting to pay their taxes. Why? A BBC news article this week quotes a Tanzanian wholesaler:
“Paying taxes is an important thing because it helps in the development of our country. Every citizen is responsible for this as it has a direct link with our development.”
Understanding the value of tax revenues is a crucial first step, but in many countries paying taxes is a complicated process that most businesspeople successfully avoid.
However, Mtwara has found a solution to tax collection that benefits both the taxpayers and the government.
The difference in Mtwara is that it is not the local tax officials who are collecting the money, but an association of traders, called Wabisoco, that Shaibu Ng’ombo belongs to.
The association uses part of the taxes collected to maintain market stalls and provide security, delivering the remaining 2/3 of the tax funds to local government. The traders see the benefits to their businesses, while the government receives tax revenues relatively hassle-free.
Tanzania is also reforming its tax system at the national level, and has seen tax revenues increase by 4 times in 10 years. Tanzania is also among the top 10 reforming countries in business regulations, according to the World Bank’s Doing Business report. As in other African countries, the informal sector accounts for a majority of economic activity. As Tanzania improves the climate for doing business, it will help informal sector entrepreneurs join the formal sector, and increase its tax base. Higher tax revenues will allow Tanzania’s government to expand education and health services, thereby benefiting all citizens.
Published Date: June 15, 2007