An appraisal of tax incentives under the TIC Investment regime
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Date
2019
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Mzumbe University
Abstract
Tax incentives are considered a necessary evil for attracting investments and increase Foreign Direct incentives. In that spirit Tanzania issue different tax
incentives via the Tanzania Investment Centre as per the Tanzania investment Act, 1997. The law puts threshold qualification for an investor to be issues with an
incentive certificate depending on relevant sector. Also, other laws like the Income Tax Act, 2004, the Value Added Tax Act [CAP I48 R.E 2002], Export Processing Zones Act, 2002 and The Mining Act, 2010 allow issuance of incentives to investors as qualified by threshold. For example save for investments in mining and petroleum, center can issue certificate of incentive to a foreigner or local investor with the qualification under section 2 (2) (a and b)1, that to qualify for and obtain Tanzania Investment Centre Certificate of Incentives minimum fixed investment cost for New, Rehabilitation and Expansion Projects should be at least US$ 100,000 for projects, which are wholly owned by Tanzanian Citizen (s), and US$ 500,000 for projects, which are wholly owned by foreign investors, or if a joint venture. Or, to qualify for an Export Processing Zones license, the investment should amongst other things, be new business or activity which has not been already established, with at least 80% of the goods produced or processed for export and annual export turnover of at least USD 500,000 for foreign investors (USD 100,000 for local investors). This research looked the qualification of the investor under above mentioned Acts, by making an analysis to see whether tax incentive attracts investment or not and if not what qualification are plausible for incentive certificate to be issue and then the merits of tax incentive in growth of Tanzania economy was evaluated as against demerits. In order to get precise materials for writing this work, the researcher employed two research techniques: documentary review and case study. In documentary review materials were gathered from legislations, policy, documents, reports, newspapers and journal articles, online articles and textbooks,. In a case 1 The Tanzania Investment Act [CAP 38 R.E 2002]. viii study the methods which were employed included direct interviews and use of questionnaires. The research revealed that, tax incentive was not a major factor for attracting foreign direct investment in a country with poor infrastructure, geographical barriers and weak taxation system. Again, comparing tax incentive issued in Tanzania and her developments, the research found that tax incentives have resulted into more revenue losses that profit, because they are means used for tax avoidance and they beneficial bonus to investor who would have invested without tax incentives. The study further noted that, incentives qualifications under different laws are not cautions to obvious reasons, thus threshold can manipulate or hide investment to qualify for incentive while it does not. For example an investment which would have come in Tanzania despite of incentives because of market and raw material needs. From the above mentioned finding, the researcher made recommendation that, the Tanzania Investment Act, 1997 should be amended, first to allow the parliament and the center to amend or withdraw tax incentive certificate in case of abuse. Second the qualification for an investor should be reviewed, instead of looking on the threshold, each investment should be evaluated differently according to purposes and benefits to Tanzania. Third, tax incentives should be reduced or abolished and the taxation system should be enhancement to facilitate transparency and accountability.
Description
A dissertation submitted to the Faculty of Law in partial fulfillment of the requirements for the award of Masters Degree in Commercial Laws (LL.M. - CL) of Mzumbe University
Keywords
Tax exemption, Tax Incentives, Fiscal Incentives, Income Tax Act, 2004, Tanzania Investment Act [CAP 38 R.E 2002], Tanzania investment Act, 1997
Citation
Chicago