How does Value Added Tax works in Tanzania?. (BY STEWART MBEGU AND NAKADORI YOHANA MJEMA)

 How does Value Added Tax works in Tanzania?. 

(BY STEWART MBEGU AND NAKADORI YOHANA MJEMA)

How cite this work

Mbegu. S. & Mjema. N. Y. (2022). How does Value Added Tax works in Tanzania?. Idiana consultancy publication

Abstract

In Tanzania,there different types of tax which are payed  by different people  in business and residential. One of them being Value added tax (VAT).This kind of tax have been significant in addition of domestic revenue in Tanzania.One can ask  is it important to pay it? This article will have all the answers who supporsed to pay and when.

INTRODUCTION

A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer. If the ultimate consumer is a business that collects and pays to the government VAT on its products or services, it can reclaim the tax paid. It is similar to, and is often compared with, a sales tax. VAT is an indirect tax because the person who ultimately pays the tax isn't necessarily the same person as the one who pays the tax to the tax authorities.

Not all localities require VAT to be charged, and exports are often exempt. VAT is usually implemented as a destination-based tax, where the tax rate is based on the location of the consumer and applied to the sales price. The terms VAT, GST, and the more general consumption tax are sometimes used interchangeably. VAT raises about a fifth of total tax revenues both worldwide and among the members of the Organisation for Economic Co-operation and Development (OECD). (Bickley, James M. (3 January 2008).   As of 2018, 166 of the 193 countries with full UN membership employ a VAT, including all OECD members except the United States,[a) where many states use a sales tax system instead.

Germany and France were the first countries to implement VAT, doing so in the form of a general consumption tax during World War I. ( Helgason, Agnar Freyr (2017).The modern variation of VAT was first implemented by France in 1954 in Ivory Coast (Côte d'Ivoire) colony. Recognizing the experiment as successful, the French introduced it in 1958. (Helgason, Agnar Freyr (2017).Maurice Lauré, Joint Director of the France Tax Authority, the Direction Générale des Impôts implemented VAT on 10 April 1954, although German industrialist Wilhelm von Siemens proposed the concept in 1918. Initially directed at large businesses, it was extended over time to include all business sectors. In France it is the most important source of state finance, accounting for nearly 50% of state revenues. (Beram, Philip ,2016)

A 2017 study found that the adoption of VAT is strongly linked to countries with corporatist institutions (Helgason, Agnar Freyr (2017).

VAT IN TANZANIA

A VAT return is a form used to submit tax payments to TRA. Currently VAT registered traders are supposed to submit returns to TRA online through e-filing or in paper form.VAT is payable on 20th day of the following month of the business that is a due date of submitting the return. If the 20th day falls on the Saturdays, Sunday, or public holiday the return shall be lodge on the first working day following the Saturdays, Sunday or Public day

What are the applicable rates under VAT?

VAT is chargeable on the taxable supplies of goods and services. The rates are as follows: -

 

How does VAT works?

 Each registered person in the chain between the first supplier and the final purchaser or user is charged tax on taxable supplies made to him (input tax) and charges tax on taxable supplies made by him (output tax).  He pays to the TRA the excess of output tax over input tax, or recovers the excess of input tax over output tax from the Authority. The broad effect of the scheme is that businesses are not affected by VAT except in so far as they are required to administer it, and the burden of the tax falls to the final consumer.

REFERENCE

Consumption Tax Trends 2018: VAT/GST and excise rates, trends and policy issues. Consumption Tax Trends. Secretary-General of the OECD. 2018. doi:10.1787/ctt-2018-en. ISBN 978-92-64-22394-3. S2CID 239487087. Retrieved 24 September2016.

Bickley, James M. (3 January 2008). Value-Added Tax: A New U.S. Revenue Source? (PDF) (Report). Congressional Research Service. pp. 1, 3. RL33619. Archived (PDF) from the original on 28 June 2016. Retrieved 24 September 2016.

Cole, Alan (29 October 2015). "Ted Cruz's "Business Flat Tax:" A Primer". Tax Policy Blog. Tax Foundation. Retrieved 24 September 2016.

Beram, Philip. An Introduction to the Value Added Tax (VAT) (PDF) (Report). United States Chamber of Commerce. Archived (PDF) from the original on 24 September 2016. Retrieved 24 September 2016.

Tanzania Revenue Authority(2022)

 Helgason, Agnar Freyr (2017). "Unleashing the 'money machine': the domestic political foundations of VAT adoption". Socio-Economic Review. 15 (4): 797–813. doi:10.1093/ser/mwx004