Tanzania is losing $1 billion every year from tax evasion and capital flight by local and foreign investors — exposing loopholes in the country’s tax administration.

A new report by Interfaith Standing Committee on Economic Justice and Integrity of Creation (ISCJIC) said investors were increasingly taking advantage of loopholes in the tax administration regime, even as the country struggles to meet its growing expenditure needs.

The data appeared to support earlier assessments by a senior government official who claimed that mobile phone firms in Tanzania are not paying their tax dues as they should.

Deputy Minister of communications, science and technology, January Makamba, said that in 2010, mobile phone companies in Tanzania earned Tsh1 trillion ($1 billion) but paid only Tsh2.7 billion ($1.7 million) in taxes.

However, Kenya earned $78.3 million in taxes from mobile phone companies during the same period, Uganda made $31.3 million while Rwanda collected $14 million, nearly 10 times what the Tanzania government earned.

The researchers concluded that only 1.5 million Tanzanians out of 15 million potential taxpayers pay their taxes. It was also revealed in the study that large and multinational companies were the major beneficiaries of tax waivers and incentives, whereas religious organisations accounted for just 0.05 per cent of all tax exemptions — though they should make up the bulk of tax exempt organisations.

The report by Interfaith titled The One Billion Dollar Question, How Can Tanzania Stop Losing So Much Tax Revenue, questions the paltry earnings that the government gets from different sectors.

Catholic Bishop and Chairman of ISCIJ, Paul Ruzoka said that the figure is underestimated since it does not include tax revenue losses from other forms of unreported trade including smuggling.

“The loss of $1billion amounts to over a sixth of the government’s entire budget expenditure of Tsh9.5 trillion in 2009/10,” he said.

Mzumbe University Lecturer, consultant and researcher, Honest Ngowi, who was part of the research team, said the government should address taxes revenue losses with a sense of urgency if it is to increase revenue collections.

“The government must undertake a review of all tax incentives with view of reducing or removing them, and the review should be made public,” he said, adding that the aim was to remove most of the incentives granted to the mining sector and reduce many of those granted to Export Processing Zone (EPZs.)