This cooperation will be carried out through capacity building and institutional development where experts from the two tax authorities will work closely together to promote continuous improvements in the following areas: analytics and business intelligence, auditing skills (including e-audit, systems audit and overall audit method and tool development), new ways to interact with the taxpayer and media policy, taxation of natural resources and international taxation.
This initiative forms an integrated part of the overall strategy of Tanzania to boost the domestic revenue collection efforts in the coming years so as to ensure a higher degree of national fiscal independence. It was stated that Tanzania is a country rich in resources and with a positive economic outlook in the years to come.
Benefit sharing by broadening the tax base
The potential for broadening the tax base and ensuring effective benefit sharing from the current and future extraction of non renewable natural resources is considerable. It was recognized that building a modern African state with close dependence and responsiveness between citizens and the government, is intrinsically linked to developing broad based effective and fair tax systems that can finance comprehensive and quality public services.
An illustration of the potential was shown when comparing the number of taxpayers in Norway (3.8 million out of a population of almost 5 million) with that in Tanzania (554,000 out of a population of 40+ Million).
Similarly the overall levels of tax collected in Norway (43% of GDP in 2010) and Tanzania (16% of GDP in 2010/11), shows some of the very long term potential as Tanzania’s economy continues to grow.
Obviously there are huge differences between Norway as the 4th richest economy in the world in GDP/Capita terms and Tanzania as a low income country, considering both the formal economy and the informal economy. The overall GDP estimate is 18 times higher in Norway. The informal economy is estimated to be between 30-70% of the formal GDP in Tanzania and limited in Norway.
The Tax for Development Initiative
The signed institutional cooperation in the area of tax administration between Norway and Tanzania will be supported by a grant from the Norwegian Government through the Embassy. For Norway this forms part of the newly launched Tax for Development initiative where a priority is placed on supporting efforts at the global, regional and national levels, to increase domestic revenue mobilization in the developing world.
Similar institutional cooperation support initiatives in tax administration have so far been signed with Zambia and Mozambique.