As external shocks led to fluctuations in commodity prices, Tanzania faced several challenges for long-term sustainable growth. In 2005, the government’s debt was growing and its tax revenue collection was low, at 10.8 percent of GDP. The government was forced to cut public spending on vital projects targeting infrastructure and human development. The tax system’s perceptible problems – low level of tax revenue collection, outdated tax payment methods, lack of monitoring and enforcement tools, slow and inefficient delivery on services, and citizen disillusionment with perceived corruption – reflected systemic issues in policy and administration.
The project took a holistic approach to increasing revenue collection. It included a technology upgrade, which allowed the country to automate systems for registering, documenting, and collecting taxes. A new e-filing system improved the efficiency, speed, and effectiveness of tax administration and revenue collection. The project also helped to reform the tax system by lowering the corporate tax rate and increasing the tax base and compliance.
Internal reforms to the tax administration included training staff on the anti-corruption policy and creating a stronger infrastructure for monitoring and evaluation. For example, two digital forensics laboratories were established to enhance the capacity of the tax investigation department.
The project also incorporated intensive education programs for taxpayers of all income levels: workshops and consultations taught citizens how to file and pay taxes and they also helped assuage doubts citizens had about their government’s commitment to providing a fair and transparent tax collection process.