Speech by President Benjamin William Mkapa at the Inauguration Ceremony of the Tanzania Revenue Authority, Kilimanjaro Hotel, Dar Es Salaam, 29th June 1996

The Vice President H.E. Dr. Omar Ali Juma, Minister for Finance Hon. Prof. Simon Mbilinyi, MP., Honourable Ministers and Members of Parliament, Your Excellencies Ambassadors, Chairman of the Revenue Authority Board Prof. Benno J. Ndullu, Commissioner General of the Revenue Authority Mr. Melkizedeck E. Sanare, Management and Workers of the Revenue Authority, Distinguished Guests, Ladies and Gentlemen

This is the fourth speech this morning on the same subject. I do not think it is possible for me to find something entirely new to add to what has been said by those who spoke before me. And, after listening to the previous three speeches I do not believe any of you is really keen to listen to another long speech!

I will not, therefore, subject you to another long speech. Afterall, what we have heard so far this morning are not the private opinions of the speakers, but the position of the entire Government on matters of revenue and expenditure. But before I formally inaugurate the Tanzania Revenue Authority I wish to do two things: First, to express on my own behalf as well as on behalf of the entire nation our gratitude to all who assisted us in setting up the Tanzania Revenue Authority; and secondly, to underline a number of the issues raised here today.

Today we are concluding efforts and preparations that began a long time ago to improve revenue collection in Tanzania. Seven years ago, the Government realised that something could be done to improve the entire process of management of revenue and expenditure in Tanzania. Since then many people and institutions have been involved in reviewing our tax collection procedures and recommending measures to improve them. They all deserve our gratitude and congratulations for a job well done. Had it not been for their good work, we would not be here today inaugurating the Tanzania Revenue Authority.

I should like in particular to mention and thank my predecessor, President Ali Hassan Mwinyi, the Second Phase Government, and Parliament, for initiating and presiding over most of the policy, administrative and legal reforms that led to the establishment of the Authority. The two Presidential Committees, the one headed by Hon. Edwin Mtei and the other by Hon. Basil Mramba, both did a good job in reviewing Government Revenue and Expenditure and coming up with many useful recommendations, including the one to establish an autonomous Revenue Authority. On my own behalf, and on behalf of the Government, I thank them very much.

I should also like to thank all donors who have helped in various ways during the prepatory phase and those who will continue to assist the Authority in the days ahead. These include the United Nations Developments Programme (UNDP); the United Nations Conference on Trade and Development (UNCTAD); the World Bank; the Danish International Development Agency (DANIDA); the United States Agency for International Development (USAID); the Overseas Development Agency; European Union and GTZ. We thank them very much. It is my hope that they will continue to cooperate with us in developing and strengthening the capacity of the Tanzania Revenue Authority. For, it is not enough to establish and independent and autonomous Authority. The Authority must be staffed with capable and highly qualified staff, with high levels of professional and personal integrity and equipped with necessary working tools and a conducive environment to be able to fulfill the duties we entrust upon them today. The Tanzania Revenue Authority is a new institution and a product of new ideas. The effective and efficient implementation of its responsibilities requires of them to learn from the experiences of others, and to accept advice and assistance from neighbours and donors.

This day, and the act of inaugurating the Revenue Authority, are imbued with great expectations from the people of Tanzania, from the Government, and from me personally. Since the Third Phase Government came to power we have always looked forward to the operationalisation of the Authority as the correct and decisive way to implement the promise in the CCM Election Manifesto to improve tax collection. So great are the expectations that we cannot afford not to fulfill them to the best of our ability.

Government capacity to fulfill its duty to the nation and to every citizen depends almost entirely on taxes and other Government revenues. It is obvious therefore that tax collection is a primary function of any Government. For it is through collecting taxes that the Government can perform each and every other of its functions - including provision of social services such as education, health, water and economic infrastructure, as well as maintenance of law and order. The means with which to serve the people is taxes.

It follows, therefore, that just as tax collection is a primary function of Government, it is equally among the most primary civic duties to pay ones due taxes faithfully, on time and in full. Indeed, a citizen who avoids to pay due taxes has no right to demand any services from the Government. Demanding such services while refusing to pay taxes is exploitation. It is equivalent to exploiting one's fellow citizens who pay their taxes faithfully. And if the tax-evader is a businessman, he or she enjoys ipso facto unfair competition over his/her tax paying competitors, and gets illegal profits. We want to build a society of equal responsibility to all people, in an environment of free trade and free enterprise.

For this reason, it is everybody's duty to pay taxes as well as the duty of every institution and company. As a matter of principle, the responsibility to pay tax, according to each person's income, must not be avoided. Those with small incomes will pay small taxes. Those with large incomes will pay higher taxes. That is the essence of fairness on the basis of equality. To pay taxes is to contribute to the running of Government and the provision of its services. As such it should be construed as a proud and nationalistic act. To waive this responsibility in respect of the citizen, however small his/her contribution will be, is to deny him/her the chance to fulfill his/her obligation to himself and his/her country. We want to build a nation of equal responsibility to all citizens, and each Government service is financed by a line tax. We cannot have a class of tax payers and another class of those who live on the taxes of others. Everyone should pay according to his income, even if he pays a very small amount. The important thing is to nurture the culture and principle of euqal responsibility to pay tax, to fund services, to strengthen security and to open equal opportunity.

We must also not lose sight of the fact that the aid we receive from donors consists of taxes which donor Governments have collected from their own citizens, including those earning low wages. It is not acceptable for us to exempt our own people from paying taxes, and then depend on other people's taxes to run our own Government. This is indeed a shameful and humiliating act. It is true our country is poor. But even within the confines of our poverty we must collect all due taxes before we think of asking for external aid.

In other words we need to increase the level of taxes collected in relation to our Gross Domestic Product (GDP). In the current financial year ending tomorrow, even after all the measures we have so far taken to improve tax collection, we expect to collect only 14.63% of our GDP as taxes. In the new financial year we expect this ratio to rise to 15.57%. It is estimated that in 1995 our neighbours in Kenya collected taxes equivalent to 23% of their GDP, and Zimbabwe 32%. The average for the European Union countries, which are some of our major donors, was 45% of their GDP last year. These figures give the correct explanation as to why Government services are so unsatisfactory. We are good at complaining about poor Government services, but not enthusiastic about the obvious solution to the problem, namely collecting a higher percentage of GDP in taxes!!

I give these figures also to illustrate the tremendous task ahead of us, the implementation of which is the responsibility of the Revenue Authority we are inaugurating today. The Authority obviously faces a demanding but inescapable duty to this nation. That duty must be performed well, in efficiency, effectiveness and honesty.

It is also the responsibility of Government and the Authority to encourage everyone to pay his/her due taxes. But it is also the responsibility of the Government to ensure that tax revenues are not wasted, misused, stolen, or embezzeld. The taxes paid by our people must be translated into development, better social and economic services, as well as the better performance of traditional Government functions such as defense and the maintenance of law and order.

We will therefore continue to fight inefficiency, corruptopn, embezzlement of Government funds, as well as other such vices in the entire process of Government revenue and expenditure. We will not tolerate misuse of Government funds, corruption, discrimination, or unfairness in the work of Revenue Authority. We have carefully selected the staff of the Authority. But it is quite possible that some undeserving people could have managed to be employed by the Authority. If such people exist, and they know themselves, I ask them not even to think about carrying on with their inefficiency or corruption in the new Authority. I demand that the terms of service and the code of conduct for the management and staff of the Authority be applied in full and across the board, without fear, favour or discrimination. The Government has provided funds it can ill afford to ensure the staff of the Authority receive higher salaries, better working tools, good transport facilities and adequate office space, more than any of their colleagues in Government. They must, therefore, show an example of efficiency, diligence and integrity. We need to see the fruits of their work.

One way to strengthen integrity and honesty in the Authority is to increase transparency in its work. Tax laws must be made available to tax payers. Our people must be educated on their responsibility to pay tax and the types and rates of taxes. The process of tax assessment must be open and known. It should not be a secret. We should not harass tax payers unnecessarily. There should be an open and transparent appeal procedure, as well as a known mechanism to receive and process complaints. Above all, we should make tax payment an easy task. Educating tax payers as well as mobilising tax payers will not bear the fruits we desire if by our actions we shall make it difficult for people to pay.

We should also remember that tax derives from production, productivity, and expansion of economic activities. We must, therefore, use part of our revenues we get to create a more conducive environment for economic activities to grow and thrive on our country. And since the private sector is increasingly taking over a larger share of economic activities, the Government will work towards increasing cooperation with it.

We have already begun to do so in concrete terms. As we were preparing the 1996/97 budget I invited the private sector to submit their recommendations on the structure of the budget. I am glad that they accepted the challenge and gave us their suggestions. Some of them have been incorporated in the budget. For example, the taxes we eliminated or adjusted for the purpose of protecting local industries, as well as reducing inconveniences and the number of taxes paid, was in conformity with the recommendations of the private sector. I thank them for this spirit of cooperation with the Government and we should work hard together to expand it.

It is true we did not implement all their recommendations in this budget. Their recommendations must of necessity emanate from a desire to promote their business interests. That in itself is not a bad thing. But the government has to take a wider perspective, taking into account national interests, and the international obligations of Government. I want to make it clear, however, that it is not true that the recommendations we did not implement in the 1996/97 budget have been rejected. Far from it. Some of them require further study, in cooperation between the Government and the private secotr. If necessary we will take them up in subsequent budgets. Where necessary relevant laws will be changed. We must remember that we have embarked upon a revolution, and a revolution cannot be completed overnight. We have to implement our reforms thoroughly, carefully, and without undue haste.

In addition, some of the recommendations from the private sector are purely of an administrative nature. For these, I ask the new Revenue Authority to study them and adopt them wherever this will lead to improved efficiency in tax administration. For, indeed, it is the business people who pay taxes that know where the shoe pinches. We must listen to them.

I repeat. The Government welcomes and will consider all ideas and suggestions from the private sector. We are serious when we say we want to build a new and cooperative relationship between the Government and the private sector. We in Government shall listen to them and do whatever possible to help our business people. But I ask them to be patient when it becomes necessary for us to move a bit more cautiously. In addition, I ask them to pay all their due taxes on the basis of existing rates. We shall no longer countenance tax evasion or non-compliance. Those who used to do so with impunity should not attempt it again. I ask that the Tanzania Revenue Authority to ensure each and everyone pays all due taxes. No one should doubt our resolve to enforce compliance, and to punish the culprits by sending them to prison in addition to heavy fines.

Having said so I wish to thank you once again for inviting me to this ceremony. I thank the Board of Revenue Authority for their good work so far, and for the excellent arrangements for this historic event. I wish them all great success in the operational phase of the Tanzania Revenue Authority which I hereby declare officially inaugurated.

Thank you for your kind attention.