Q&A – 23 May 2016
Taxing IFC officers
I am a tax expert and find it difficult why the employees of the International Finance Corporation (IFC) are exempt from paying taxes in Tanzania? Can that be changed? If I were the leader of this country I would like to see no exemptions being issued to anyone and further I would like all such exemptions to be revoked with immediate effect. Guide me how this can be achieved?
DF, Dar
We are glad that you are not the President of the country otherwise you could take all of us to the verge of bankruptcy. Perhaps you are not the President because of your primitive thinking. We explain to you why.
Exemptions are not always bad for the country. There are certain industries and companies that you will never be able to attract without giving them certain incentives to come invest. Do not be blinded by immediate taxation vis a vis the long term growth of an economy. We are unsure what your background is but a few course on international business, international trade, finance and economics might help you to understand the economics of a country better. In todays competitive arena we are competing for investments against 200+ countries from around the world.
As for the IFC as is the case for other multilateral or bilateral agencies, it came into being in 1955 and there is a specific Act in Tanzania, the International Finance Corporation Act Cap 207 (R.E. 2002) which clearly states that the provisions of the Agreement that formed the IFC overseas has the force of law in Tanzania.
One such article in the Agreement is section 9 on immunities from taxation which states unambiguously that the corporation, its assets, property, income and its operations and transaction, authorized by this Agreement, shall be immune from all taxation and from all customs duties. The Corporation shall also be immune from liability for the collection or payment of any tax or duty. The Agreement further states that no tax shall be levied on or in respect of salaries and emoluments paid by the corporation to directors, alternates, officials or employees of the Corporation who are not local citizens, local subjects or other local nationals. It is this provision, which has the effect of law, that allows the TRA not to impose any taxes on IFC employees. The same type of provisions protect the employees of other agencies as well.
Whilst theoretically you can repeal this Act and start imposing taxes, no person in their right senses would want to repeal the Act as it would have dire consequences. Remember we are part of an international community and cannot afford to jeopardise relationships with them.
Since you are a tax expert we recommend that you use your expertise in suggesting broadening of the tax base and improvement of tax collection measures amongst others that can be more beneficial to the country.
Confusing on when law comes into force
I am totally confused as to when laws in Tanzania come into force. I would think that once they are passed by the National Assembly and assented by the President they come into force only to find out that there are more steps to follow. Please explain to me how this works? This is stalling progress is it not?
IF, Dodoma
Bills, which are the draft laws, are taken to the National Assembly in Dodoma. After passing the National Assembly, the President must assent to the bill for it to become law. However upon assentment, it is not automatic that the bill will come into force. Coming into force is the commencement date of the act.
The law can come into commencement one amongst the following three ways. The first is where a date of commencement is stated in the Act itself, which in recent times has become quite rare. The second way is where the Act leaves the commencement in the hands of a certain authority appointed by the respective Act itself. For example the Act would state that this Act shall come into force on such date as the Minister may by notice in the gazette appoint. Hence under this method, the laws commencement date is at the mercy of the Minister or relevant appointment authority. A typical example is the Minister for Industries and Trade who for the past 3 years has surprisingly failed to bring into force the commencement of the change in law for a company to have a single shareholder, despite both the law having passed the National Assembly and having been assented to by the President. Hence till date you cannot register a single shareholder company because of the non-action of the appointing authority. This is a typical example of progress being stalled.
The third way for an Act to commence, again which is rare, is for the Act not to mention it and the commencement date would then automatically be as soon as it is published in the gazette.
Community service instead of prison
Is there a law in Tanzania that allows prisoners to perform community service instead of rotting in prison? What are the conditions?
UU, Moshi
There is an act called the Community Service Act which makes provisions for the introduction and regulation of community service on offenders in certain cases, and for connected and incidental matters.
Section 3 states that (1) where any person is convicted of an offence punishable by– (a) imprisonment for a term not exceeding three years, with or without the option of a fine; or (b) imprisonment for a term exceeding three years but for which the court determines a term of imprisonment for three years or less, with or without the option of a fine, to be appropriate, the court may, subject to this Act, make a community service order requiring the offender to perform community service.
Hence if the offender is sentenced to a term not exceeding 3 years, this Act can be invoked. You must remember that this is not an automatic right and the Community Service Orders Committee amongst others have discretionary power under this Act.