Tanzania is losing over $20 Billion in revenues through tax incentives to investors in the export processing zones and illicit flows, a new survey that calls for tough legislation to stem the loopholes shows.

The latest Global Financial Integrity (GFI) report on trade mis-invoicing launched last week found that mis-invoicing of trade facilitated a whopping $60.8 Billion in illicit financial flows out of Tanzania, Kenya, Uganda, Ghana and Mozambique between 2002 and 2011.

Gross illicit flows due to trade mis-invoicing in Tanzania alone were $18.73 billion during the period while the government lost another $248 million per year in tax revenue from mining companies alone.

Trade mis-invoicing happens either under export under-invoicing or import over-invoicing while through transfer pricing, firms hide their profits from taxation by employing complex county specific strategies — mainly manipulation of prices of cross-border transactions between related affiliates.

Analysts in Dar es Salaam now want the Tanzania government to reconsider tax exemptions to EPZs and introduce new curbs to cheating corporations.

Raymond Baker, GFI president, said 10-year tax holidays provided to investors under EPZs in Tanzania were being misused by companies to unlawfully move capital out of the country, undermining the roles such initiatives were expected to play in the economy in the first place.

“Some of the measures to be taken include adopting a legislation making abusive trade miss-invoicing wherever and however it is done, against the law,” said Mr Baker.

Benno Ndulu, Governor of the Bank of Tanzania, said the government should enter into bilateral ties with Western countries through which it could push for a return of the stolen assets under illicit mis-invoicing.

“Such surveys are ineffective unless something is done about the trade mis-invoicing problem. One of the ways is to use bilateral ties to push for the stolen assets to be returned to the country,” said Prof Ndulu.

Source: The East African

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