Tax incentives for multinationals not a good policy choice

Trade unions in Tanzania affiliated to PSI and their allies have told the government that using tax incentives to attract investors is not a wise policy choice. They say it prevents the government from raising the revenue it needs to address problems of budget deficits, housing shortages, education, health and workers' wages.

Launching a policy brief, "Lessons from the Past: Managing Tanzania's Mineral Resources for Socio-economic Development and Progressive Public Service Investment", the President of the Trade Union Confederation of Tanzania (TUCTA), Brother Tumaini Nyamhokya, advised that the best way for resource-rich countries like Tanzania to benefit from their natural resources, including strategic minerals, is for the government to increase its share of investment while ensuring that companies pay their fair share of taxes to raise the revenue needed to invest in public institutions and public services such as education and health. Government must also diversify the economy to ensure that the mining sector leads to job creation for the masses and a growing youth population. He notes that the increased contribution of the mining sector to GDP is now due to initiatives taken by the government. Initiatives such as joint venture mining projects between the government and mining companies, the acquisition of free-carried shares and the sharing of future economic benefits from mines on a 50/50 basis are all initiatives that need to be replicated in the strategic minerals sub-sector, also known as critical minerals.

Tax policy brief: Lessons from the past

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PSI has produced, in collaboration with the FES Tanzania office, a tax policy brief entitled “Lessons from the past”, which sets out a number of recommendations to address illicit financial flows (IFFs) in the mining sector in Tanzania. These IFFs result in government revenue losses that drain resources from sustainable development. They worsen inequalities, fuel instability, undermine governance, and erode public trust.

The policy brief, prepared with support from the Friedrich-Ebert-Stiftung (FES) Tanzania, outlines recommendations for addressing illicit financial flows in the mining sector, including strengthening national policy and legal frameworks for financial integrity by developing a framework for tax incentives; and maximising benefits from the critical minerals sub-sector by developing specific fiscal policies that move beyond mere tax incentives and focus on a people-centred development agenda.