Source: DAILY NEWS
DAR ES SALAAM: THE banking sector’s input to the tax revenue has significantly been growing, contributing 3.9tri/- in the past three years, which is an average of 18 per cent of the total collection during the period.
This figure includes corporate tax (the most significant component of the contribution) and irrecoverable VAT together with taxes collected on services (VAT and excise duty) and by way of withholding (employment taxes and withholding tax).
The study report unveiled yesterday in Dar es Salaam shows that from January 2021 to December 2023, the sector’s contribution grew annually at an average of 1.0tri/- per year.
Prepared by the Tanzania Bankers’ Association (TBA) in collaboration with the PwC, the report indicates that in the period of three years to 2023, the 26 participating banks contributed a total of 1.6tri/- in 2023, which is up from 1.3tri/- recorded in 2022, and 1tri/- posted in 2021.
Presenting the report, Mr Cletus Kiyuga, PwC’s Financial Services Industry Group Leader, said the banks that participated in the study, which account for over 94 per cent of total assets for all banks in the country, grew their total tax contribution by 30 per cent from 1.0tri/- in 2021 to 1.3tri/- in 2022 and then to 1.6 in 2023.
“One of key drivers has been an increase in profitability of the sector, doubling corporate income tax payments in 2023 as compared to 2021,” Mr Kiyunga stated.
Corporate tax paid by the participating banks, which accounted for 18 per cent of overall corporate tax in Tanzania between 2021 and 2023, increased dramatically by 49 per cent in 2022 to 537bn/- and by 34 per cent in 2023 to 718bn/- indirect tax on financial services.
Also, the VAT and excise duty charged on financial services also showed a significant increase – by 28 per cent in 2022 to 313bn/- , and 20 per cent in 2023 to 375bn/-.
On the part of employment taxes, the sector’s PAYE contribution from 2021- 2023 amounted to 673bn/-, equivalent to 8.4 per cent of the total PAYE collected in Tanzania.
Other taxes comprise service levy, stamp duty, property tax and customs duty.
During the surveyed period, the 26 TBA member banks paid service levy totaling 23.3bn/-, followed by the stamp duty which was 2.48bn/-, property tax of 0.77bn/-, and customs duty of 0.4bn/-.
“This demonstrates the sector’s participation in broadening the tax base and supporting indirect tax revenues. TBA remains committed to fostering a conducive environment for the banking sector to thrive and continue its contribution to the country’s economic prosperity,” according to TBA’s Chairman Theobald Sabi.
“We are confident that this report will serve as a valuable resource for fostering informed dialogue and shaping future policies that support the continued growth and development of the Tanzania banking sector,” Mr Sabi stated.
He argued that as the sector continues to grow due to presence of conducive environment, its contribution is expected to increase.
“We send our gratitude to the government under President Samia Suluhu Hassan for continuing efforts to foster conducive environment for banking industry, which contribute the sector to grow,” he said.
Officiating the launch of the report, Bank of Tanzania (BoT) Deputy Governor Sauda Msemo (Financial Stability and Deepening) stated that the taxes from banks were vital for economic growth.
Ms Msemo noted that the provision of credits has seen the banks enabling businesses to flourish and production to grow while facilitating implementation of government’s projects.
“The banks have been providing capital which helps to turn ideas into tangible businesses, hence creating employments and improve wellbeing of Tanzanians,” she said.
She assured that the government would continue putting in place conducive environment for banks to thrive, while pledging that the government would remain responsive to the needs of the sector.
The banking sector is one component of the financial services sector, which consists of many other components.
The banking sector is primarily considered with saving and lending, whereas the financial services sector also includes investing, insurance and real estate.
THE AUTHOR: Bernard Lugongo
