Embassies express concern on how the Tanzania Revenue Authority mistreats foreign investors

Ambassadors and High Commissioners representing ten countries in Tanzania have written a joint letter to the Minister of Foreign Affairs and East African Cooperation complaining against how foreign investors are being mistreated through the tax regime.

“We are writing to express our concerns regarding both recent and ongoing challenges faced by foreign investors in Tanzania, specifically related to the taxation administration practices of the Tanzania Revenue Authority (TRA),” reads the envoys’ joint dispatch to the foreign ministry.

The joint letter was signed by Michael A. Battle, the Ambassador of United States of America to Tanzania; David Concar, the British High Commissioner to Tanzania; Wiebe de Boer, the Ambassador of the Kingdom of Netherlands and Mags Gaynor, the Chargé d’affaires and Deputy Ambassador of Ireland.

Other envoys include Nabil Hajlaoui, the Ambassador of France to Tanzania; Peter Huyghebaert, Ambassador of Belgium; Kyle Nunas, the Canadian High Commissioner; Seungyun Lee, the Chargé d’affaires and Deputy Ambassador of Korea; Charlotta Ozaki Macias, the Ambassador of Sweden and Thomas Terstegen, Ambassador of Federal Republic of Germany to Tanzania.

Tanzania’s Foreign Minister, January Makamba has already planned to meet with the envoys and address the matter amicably, because, if anything foreign investments are what is keeping the country’s economy afloat.

In their joint dispatch the excellences the envoys pointed out that their nations have made significant progress in attracting and expanding quality international investment into Tanzania over the last few years, emphasizing good governance and best practices through regular trade missions and meetings within their business community.

The ambassadors’ letter indicates that business investment registrations increased from USD 3 billion in 2022 to USD 5.5 billion in 2023, reflecting good progress by the Tanzania Investment Centre.

“However, we believe the good work being done by so many to restore Tanzania’s reputation as a destination for Foreign Direct Investments is now being undermined,” the envoys write.

“Many of our investors are encountering significant disruption due to un-evidenced notices from the Tanzania Revenue Authority demanding payments and account reconciliations dating back up to 15 years.”

The letter adds that many businesses have faced ‘bank agency notices’ that freeze accounts, halt operations and negatively impact employee salaries and supplier cash flow.

“Companies have signed tax concession agreements with the Tanzania Investment Centre and line ministries, only to be advised that the TRA will neither recognize nor honor the agreements because they have not been “gazetted” in Dodoma.”

Investors also report that TRA agents levy extraordinary tax bills not supported by Tanzanian law, threaten investors and Tanzanian partners when companies protest or appeal these practices, and freeze or seize bank accounts and company assets without notification or timely legal recourse.

The foreign envoys point out that over the years, these companies have undergone audits by major international audit firms, approved by the Tanzanian government, to ensure adherence to international auditing standards.

“And the TRA audits of these audits, which are conducted every 1-2 years.”

“The Tanzania Revenue Authority’s internal investigations of audits conducted by the TRA, effectively results in double audits but despite these rigorous procedures, companies are now receiving notices with additional demands for tax payment.”

“For instance, one company received a notice for 1.2 billion/- demanding resolution within three working days for discrepancies dating back 12 years, under the threat of having their operational accounts frozen and funds withdrawn.”

The company had to halt nearly all business operations to address the issue.

“We understand this trend has caused a significant number of businesses to register bankruptcy, hundreds of companies to slow or halt business operations to resolve inflated and incorrect assessments, and foreign shareholders to review or pause investments in Tanzania.”

“Some new investors report that their companies are deciding not to invest in Tanzania after learning of the experience of existing investors with the TRA.”

The letter to the minister reminds that consistency, clarity and predictability of the regulatory environment are crucial to support business growth and attract further investment.

“While our businesses strive to comply with Tanzanian laws and meet their obligations, the current approach does not foster a conducive business environment.”

It also risks divestment and a return to declining confidence in Tanzania as a destination for quality Foreign Direct Investments (FDI).

“We respectfully request a meeting with you, the Minister of Finance, Minister of Investment and Planning, Minister for Industry and Trade and the Commissioner General of TRA to discuss a more amicable and constructive way forward.”

We are grateful for your earliest consideration of and response to this urgent issue and remain committed to working collaboratively with the Tanzanian government to find solutions to these challenges which shore up and further rebuild confidence in Tanzania’s business environment, in line with the country’s ambition to achieve inclusive economic growth and become an upper middle- income country.

The envoys letter was also copied to the office of the Prime Minister; President’s Office, Minister of Investment and Planning; Minister of Finance; the Commissioner General TRA; the President’s Office – Planning Commissioner and the Executive Director, Tanzania Investment Centre