Impact of tax policy harmonization on the economic performance in Zanzibar

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University of Dar es Salaam
The study was designed to assess the impact of tax policy harmonization on the economic performance in Zanzibar. In carrying out this study, tax performance were critically reviewed for the past 10 years, where different dimension of share of different taxes on total revenue and GDP were investigated and compared between Tanzania mainland and Zanzibar. Research mostly used on-depth documents review for the case of economic performance and semi-structured interview and extensive consultation to assess stakeholder perceptions about the tax harmonization process and its impact on the various macro-economic variables. The study found that, tax harmonization has negatively affected the economy of Zanzibar by restricting the rate of growth GDP. Consumption, investments, and re-exports trade and favouring the growth of imports from mainland Tanzania. This study also found that it is not easy for a single tax policy to cater for the interest of the two different economic. Socially, the harmonization of taxes have increased tax burden to the island citizens, increased poverty. In addition, there was a decrease in the volume of trade which is directly linked with unemployment. Finally, we recommended that, the revolutionary government of Zanzibar and union government should agree on some minimum tax rates to be imposed leaving more latitude for both sides of union. Alternatively the Government of Zanzibar should have Moderate Autonomy over the tax regime with respect to Corporate Income Tax (CIT) and customer’s tariffs in order to suit its requirements encourage investments as well as improve the revenue performance and contribution of tax revenue to GDP. Lastly the government of both side of union should initiate effort within the Joint Finance Commission (JFC) to address all the unclear tax issues in the union and Zanzibar in particular.
Available in print form, East Africana Collection, Dr. Wilbert Chagula Library, Class mark (THS EAF HJ2599.5.T34O87)
Tax policy, Economic performance, Zanzibar
Othmani, A. A (2009) Impact of tax policy harmonization on the economic performance in Zanzibar, Master dissertation, University of Dare es Salaam