Finance Minister Mwigulu Nchemba: Photo: State House
Tanzania Proposes Bold Reforms Towards Cashless Economy in 2024/2025 Budget
By Adonis Byemelwa
Tanzania’s Government unveiled its highly anticipated Budget Proposal yesterday, June 13th, 2024, for the Financial Year 2024/2025, heralding a watershed moment in the nation’s economic trajectory.
Against a backdrop of palpable anticipation and spirited debate, all eyes converged on transformative reforms poised to reshape Tanzania’s financial terrain.
Central to these discussions is a bold legislative initiative aimed squarely at curtailing cash transactions, a strategic endeavor designed to fortify tax administration effectiveness while advancing economic transparency and accountability on a national scale.
A key highlight of the proposed budget is the potential introduction of legislation to curtail cash transactions, a measure aimed at bolstering tax collection efficiency and fostering a more transparent economic environment.
In a compelling address, Twaha Mpembenwe, Vice Chair of the Budget Committee of Parliament, underscored the Committee’s findings and recommendations. He emphasized that one of the primary obstacles in tax collection has been the widespread use of cash in transactions.
Mpembenwe advocated for amendments to existing laws, specifically the Payment Systems Act Chapter 437 and the Tax Administration Act Chapter 438, to mandate electronic payments for goods and services. This, he argued, would enhance the government’s ability to track and optimize revenue streams effectively.
“The Committee advises the Government to take bold steps in modernizing our payment systems to reduce reliance on cash,” Mpembenwe asserted, highlighting the importance of educating the public and incentivizing financial institutions to promote electronic banking. He stressed that transitioning away from cash transactions could lead to significant improvements in tax compliance and economic transparency.
Jonas Mbunda, Member of Parliament for Mbinga Town, echoed these sentiments, urging Finance Minister Dr. Mwigulu Nchemba to spearhead legislative efforts promoting non-cash transactions. Mbunda cited Tanzania’s comparatively lower tax revenue collection rate within the East African region, attributing this in part to the prevalence of cash-based transactions.
“To enhance revenue collection, we must strengthen our ICT-based tax systems and ensure they are responsive to emerging challenges,” Mbunda stated emphatically. He proposed that the government’s strategy should prioritize incentivizing businesses and individuals to adopt digital payment methods.
Festo Sanga, representing Makete in Parliament, contributed to the debate by advocating for comprehensive legislation to facilitate a seamless transition towards a ‘cashless economy.’ He emphasized the potential of such a shift not only to curb corruption but also to streamline tax administration and enhance overall economic efficiency.
Sanga emphasized, “Moving towards a cashless economy can revolutionize our tax collection efforts and mitigate the challenges posed by cash transactions,” underscoring the need for legislative reforms to support this transition.
Josephat Kandege, MP for Kalambo, took the proposition further, suggesting the complete elimination of cash transactions in favor of a fully digital payment system. He argued that such a move would not only simplify transactions but also improve tax compliance and accountability across all sectors of the economy.
Shamvi Vuai Nahodha, a nominated MP, brought forward concerns raised by business owners regarding Tanzania’s complex tax regime and its impact on economic competitiveness. He stressed the need for harmonization of tax policies and regulations to alleviate burdens on businesses and ensure fair and consistent taxation practices.
These discussions reflect a growing consensus among Tanzanian lawmakers on the imperative need for legislative reforms to modernize economic transactions and enhance tax administration. The proposed measures aim not only to optimize revenue collection but also to foster a business-friendly environment that encourages investment and economic growth.
Anticipation mounts as Tanzania readies to unveil its budget for the upcoming fiscal year, with keen scrutiny on the government’s stance towards transformative reforms. The efficacy of these proposed measures, aimed at advancing a cashless economy and refining tax policies, looms large as pivotal to steering the nation’s economic course toward sustained growth and development.
Stakeholders across sectors await eagerly to see how these reforms will be articulated and implemented, recognizing their potential to bolster transparency, enhance fiscal discipline, and attract investment. The outcome of these deliberations promises to shape Tanzania’s economic landscape significantly, setting a precedent for future prosperity and resilience in the global marketplace.
