The Multiple Dividends of Abolishing Statutory Tax Exemptions

This paper shows that the need to increase tax revenue in Tanzania is obvious and that this can be done through a base - broadening, marginal rate-reduction and simplification of tax reform. It argues that minimizing statutory exemptions shall, not only broaden the tax base, but also simplify the tax system, improve compliance and enhance transparency and good governance. Marginal rate-reduction in personal income tax as well as in the value added tax could be expected also to impact favourably on voluntary compliance and economic efficiency hence resulting into an even broader tax base in the future. The paper also builds a case for a more effective enforcement of the tax regime on employment income and a commitment to a consistent tax reform agenda so as to minimise the uncertainties in the existing tax policy stance. (Af. J. of Finance and Management: 2003 11(2): 26-32)