Cellcos come under the tax man’s spotlight

1 Oct 2008

Tanzania’s mobile operators have come under scrutiny as the country’s tax agency, the Tanzania Revenue Authority (TRA), moves to close loopholes in the regulations in order to reduce the wiggle room for so-called ‘tax planning’ by companies. The practise of tax planning (tax avoidance) is used by some large organisations to reduce their tax liabilities due under the Income Tax Act (2004), whereby a company can legally offset capital allowances from its gross profit in order to book a taxable net profit. If however, the taxpayer can arrange to book an overall net loss to appear in its fiscal results, it can theoretically minimise or even remove any tax payments due. The TRA however, is keen to stop the practise of tax planning and is conducting a review of the cellcos – Vodacom, Tigo, Zain and Zantel – to see if they are culpable. In an interview with The East African Standard newspaper last week, the Deputy Commissioner of the TRA, Placidus Luoga, confirmed that while operators had been paying tax, the regulator wanted to check on whether tax planning has been taking place.