Legal Challenges Relating to Taxation of the Informal Sector in Tanzania

Abstract

This article looks at some underlying legal challenges of taxing the informal sector in Tanzania. In many African countries SMEs have been in existence since 18thc and their recognition is un voidable situation. In Tanzania Micro and Small Enterprises (MSMEMs) are recognized in the Income Tax Act. A presumptive Taxation system is used as a means of taxing the sector. However, one of the challenges of using this system is on how to bring all the MSMEMs into tax base. Despite all what has been done by MKURABITA (Financing and Financing Plan), the small informal sector still cannot pay tax as provided in the tax law as the sector does not meet legal requirements for taxpaying sectors. Devising strategies that will bring the sector into tax net seems to be one of the solutions the government should think about. It is against the above context that the article exposes legal challenges in taxing the sector and highlights on how the government can structure and implement some legal strategies to bind the informal sector to pay tax.