Poor administrative capacity
centres. In such cases, tax collectors must travel among market sites, making
collection more occasional and difficult to enforce. Lack of reliable transport may
further exacerbate the situation. Given the complicated revenue system, already
discussed above, it is justified to suggest that local governments do not have
adequate collection personnel, and that a substantial strengthening of staff is
needed to administer the present revenue system. However, there are about 110
local authorities in Tanzania, each with a different tax system. To establish
adequate capacity for designing and administering the existing revenue system in
all these councils will require more resources than can be available in the short to
medium term in Tanzania.
There is undoubtedly room for improved tax administration. However, before
considering the issue of capacity a more fundamental issue has to be addressed.
This has to do with the rationale to squeeze additional revenues from poorly
designed taxes. In other words, improved administrative capacity may increase the
negative effects on the economy and society in general, and lead to more inferior
outcomes than the present system. Thus, the major problem may not be lack of
capacity, but the tax structure itself. This reasoning has implications for the
sequencing of the reform activities to be discussed below.
Resistance from taxpayers
Taxes are widely perceived to be unfair. Taxpayers see few tangible benefits in
return for the taxes they pay. Virtually no development activities are undertaken
through councils’ financial sponsorship, and even the existing capacities are not
producing the expected services due to lack of operation and maintenance funds
(Semboja and Therkildsen, 1992). The deterioration and in some cases nonexistence
of public services heighten taxpayers’ perceptions of exploitation from
an unequal contract with government, and this promotes tax resistance (Fjeldstad
and Semboja, 1998). Although most taxpayers are unable to assess the exact value
of what they receive from the government in return for taxes paid, it can be argued
that they have general impressions concerning their terms of trade with the
government.18 In this context, it can be assumed that taxpayers’ behaviour is
influenced by their satisfaction or lack of satisfaction with the terms of trade with
government (Levi, 1988). Thus, if the system of taxes is perceived to be unjust,
tax resistance may be considered as an attempt by the taxpayers to adjust their
terms of trade with the government.1