Leadership Changes at TRA Amid Taxpayer Concerns, and EY Kenya Faces Reputation Challenges Post World Bank Sanction

Speculation is rising over the abrupt removal of Tanzania Revenue Authority (TRA) Commissioner General Alphayo Kidata earlier this week against a backdrop of discontent among foreign investors and domestic traders over questionable taxation practices.

President Samia Suluhu Hassan on Tuesday named Zanzibar revenue chief Yusuph Juma Mwenda as the new TRA boss, replacing Mr. Kidata, who had held the position since April 2021. Mr. Kidata was moved to an unspecified advisory role in State House. This change comes as the government prepares for discussions with members of the diplomatic corps to address complaints about unfair taxation of foreign direct investments (FDIs) in Tanzania.

Mr. Kidata, in his second stint as the head taxman, was reassigned amid rising tensions. Local market traders had staged a second strike within a year, protesting long-standing harassment by TRA officials. The timing of his removal also coincided with preparations for discussions with diplomats concerned about Tanzania’s taxation practices.

The diplomatic community’s concerns were formalized in a letter dated June 26, signed by ambassadors and high commissioners from ten countries, including the United States, Canada, Britain, Ireland, Germany, France, Belgium, the Netherlands, Sweden, and South Korea. They cited various issues, such as “unevidenced” TRA notices demanding payments for up to 15 years, extraordinary tax bills not supported by law, and the rejection of tax concession agreements by the TRA. The letter highlighted an incident where a company received a Tsh1.2 billion tax notice requiring payment within three days for discrepancies dating back 12 years.

Foreign Affairs Minister January Makamba responded by promising to convene a roundtable discussion with relevant government officials and representatives of aggrieved investors. He assured the diplomatic corps of Tanzania’s commitment to protecting FDIs and addressing any transgressions that could harm the country’s reputation as an investor-friendly destination.

Locally, traders in Dar es Salaam and other urban markets have been vocal about their grievances. Their recent strike revolved around demands for a more transparent tax system, a concern that remained unresolved since a previous strike at Kariakoo market in May last year. The government managed to calm the situation with promises of solutions, including a more efficient system for documenting receipts and invoices to ensure accurate tax assessments.

Key government officials, including Prime Minister Kassim Majaliwa and Finance Minister Mwigulu Nchemba, were involved in talks with traders to address their concerns. Meanwhile, the foreign envoys have requested the attendance of top cabinet ministers and the new TRA commissioner general at the upcoming meeting to discuss the investors’ grievances.

Mr. Kidata’s removal also followed his chequered history in the civil service, especially during the tenure of ex-president John Magufuli. He had multiple roles, including a brief stint as Tanzania’s envoy to Canada, and various positions within the government. During his second tenure at TRA, he presided over a steady rise in monthly tax collections, which had not dipped below Tsh2 billion since August last year, reaching an all-time high of Tsh3.05 billion in December 2023. Annual tax revenues increased by 30% from Tsh18 trillion in 2020/21 to Tsh24 trillion by the end of the financial year 2022/23.

In Tanzania’s latest budget, TRA has been set a new collection target of Tsh29.41 trillion for the 2024/25 fiscal year to cover more than two-thirds of the Tsh49.35 trillion expenditure plan through domestic financing.

This significant reshuffling within Tanzania’s revenue authority and government ministries signals a critical juncture as the country grapples with balancing fair taxation practices and maintaining investor confidence. As discussions progress, stakeholders are keenly observing how these changes will impact Tanzania’s business environment and economic stability.

EY Kenya’s Reputation Faces Severe Risk Following World Bank Sanction

Ernst and Young Kenya (EY Kenya) faces a severe blow to its reputation as it grapples with a two-year debarment from World Bank projects and programs, a consequence of serious allegations of conflict of interest and corruption within its operations related to two major public programs in Somalia.

The World Bank’s decision to debar EY Kenya, announced on June 26, stems from an extensive investigation revealing multiple breaches of the bank’s code of conduct concerning the Somali Core Economic Institutions and Opportunities Program (Score) and the Second Public Financial Management Capacity Strengthening Project (PFM II). Specifically, EY Kenya was found to have failed to disclose conflicts of interest during both the selection and implementation phases of four contracts under these projects. Moreover, the investigation uncovered the involvement of an agent in these contracts, which further exacerbated the conflict of interest issues.

One of the most concerning findings was related to the execution of one of the contracts, where EY Kenya facilitated the provision of allowances to project officials. This act was deemed by the World Bank as constituting fraudulent and corrupt practices, directly violating the stringent Consultant Guidelines set forth by the institution.

The repercussions of the World Bank’s sanctions are profound and multifaceted for EY Kenya. Beyond the immediate financial and operational impacts, the firm faces significant damage to its reputation. Potential clients and partners may now hesitate to engage with EY Kenya, fearing association with a firm embroiled in such serious ethical violations. This could lead to a loss of lucrative business opportunities and a notable decline in competitiveness within the market.

EY Kenya’s situation is emblematic of a broader trend where firms found in violation of international standards of integrity face harsh penalties, impacting not only their current operations but also their long-term viability and standing in the global business community.

This latest development places EY Kenya among a list of Kenyan entities blacklisted by the World Bank from participating in projects funded by the Washington-based institution. As part of the settlement agreement with the World Bank, EY Kenya has acknowledged culpability for its sanctionable practices and has committed to implementing a rigorous integrity compliance program. This program is expected to align closely with the World Bank’s Integrity Compliance Guidelines, aimed at ensuring that the firm operates with transparency and ethical integrity moving forward.

To regain eligibility for future World Bank projects before the end of the 30-month debarment period, EY Kenya must demonstrate substantial progress in adhering to the agreed-upon integrity compliance conditions. This includes ongoing cooperation with the World Bank’s Integrity Vice Presidency to address and rectify any remaining concerns regarding past misconduct.

The implications of this case extend beyond EY Kenya’s immediate operations, serving as a stark reminder of the critical importance of upholding ethical standards in international development projects and the severe consequences that await those who fail to do so.

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