The Parliamentary Parastatal Organisations Accounts Committee (POAC) has been told that the government lost USD 308m equivalent to 500bn/- in tax revenue from sale of Zain Africa assets in Tanzania to Bharti Airtel.
Harry Kitillya, the Tanzania Revenue Authority Commissioner General told the committee yesterday that the government lost the revenue because assets in Tanzania were not sold since its owner did not change.
Kitillya said the process of selling the company was done in Netherlands, explaining that it was not easy for them to collect revenue from the country they can not reach.
He told the committee that what was sold was Zain Africa BV and not Zain Tanzania.
The committee chairman, Kigoma North Member of Parliament for Chadema, Zitto Kabwe said the amount lost is equivalent to 30 per cent of government’s capital which it deserved to gain after the sale of 4 million subscribers at USD 252 each.
The government owns 40 per cent of shares of the company while ‘Bharti Airtel’ company of India holds 60 per cent.
“This amount has been lost due to bad financial structure,” said Kabwe when the committee met with the Tanzania Revenue Authority (TRA) officials in Dar es Salaam yesterday.
“We want the government through TRA to explain to the committee the whereabouts of the amount. We would have used the funds to construct schools, hospitals and improve social services”, he said.
He said the Income Tax Act of 2004 have some weaknesses which provided loopholes for diversion of funds.
The committee directed the ministry of Finance and Economic Affairs to bring an investigation report on the matter within a month with proposals to change or improve the laws.
Kabwe said the Treasury has to evaluate the whole process and list down all the weaknesses of the law which have led to the loss.
He said the government should also state the amount which it expected to collected, if the company would have had a transparent financial structure, advising them to send some officials to Nigeria to learn on how they managed to benefit after the company was sold to the Indian firm.
He said that countries like Nigeria sold their shares to Bharti Airtel but lost nothing because they amended their laws.
The chairman wondered why Tanzania lost such a huge amount of money while all the countries use similar financial structures. He urged TRA officials to copy from what their neighbouring countries are doing to ensure efficiency in tax collection.
“There is a ghost company called Celtel BV which owns Celtel Tanzania and is itself owned by Celtel Africa. Celtel Africa was sold to Zain and then to Bharti Airtel but Celtel BV continued to own Zain Tanzania and even now Airtel Tanzania. So they avoided tax and will continue doing so unless we change our laws to curb tax avoidance measures,” stressed Kabwe.
He said the committee has also instructed the Ministry of Finance to start a process of divestment of 50 per cent of its shares to the public through the Dar es Salaam Stock Exchange (DSE) so as to improve corporate governance (transparency) and curb transactions costing the nation.
“This will help us to see the true valuation of shares as a response to any transaction. We expect this will take a month to complete.”
Kabwe said the government is also losing money through telephone towers since mobile phone companies have given the task of operating them to private companies.
For his part, the Deputy Permanent Secretary in Ministry of Finance, Servacius Likwelile said they would implement all the directives.
He said they have started to list government shares in all the companies, a process which he said would help to collect more revenues.