The impact of tax remission - (special relief under 3rd schedule of vat act 1997) to the general performance of VAT : the case of mining companies in Tanzania

In an effort to improve the economy, the government of Tanzania has been taking several measures to create a favourable investment climate for both local and foreign investors. Among the measures taken was the provision of a large variety of incentives; some of them being different tax exemptions provided under different tax statutes. The unanswered question which this study sought to investigate on is the extent to which tax exemptions provided under 3rd schedule of VAT Act 1997 negatively affected VAT revenue collections in the country. Data were obtained from a sample of 83 respondents from Dar es Salaam city only. They included businesspersons, TRA staff, Tax consultant and auditors. The study was made at the Department of Large Taxpayers where large business is controlled and they constitute about 70% of the Total government domestic revenue. The questionnaires administration and interview methods were used for data collection. The responses indicate that there is a perception that the exemptions provided under the 3rd schedule of VAT Act negatively resulted to poor VAT performance. Additionally, majority of respondents felt that there were no sufficient controls instituted to make sure that the exemptions are properly allowed only to bodies and items listed in the 3rd schedule of the VAT Act. It was also felt that the great number exempted items provided under the schedule and tax exemptions given to various item is among the attractions to the investors in Tanzania. On the other hand, study results indicated that the respondents acknowledged that apart from revenue collection underperformance, companies enjoying special relief have made some positive contributions to the national economy