Tax authority in Tanzania

Aligning interests and disciplining rents in Export Processing Zones (EPZs) and Special Economic Zones (SEZs) in Tanzania.

Summary:

The Export Processing Zones (EPZs) seek to attract new export-oriented foreign and local investments to create international competitiveness for export-led economic growth. The Special Economic Zones (SEZs) aim to help transform Tanzania into a globally competitive country by accelerating domestic production, promoting exports and generating employment. The EPZ/SEZ programmes thus have the potential to become effective industrial policy instruments for the government’s renewed industrialisation efforts. However, unproductive rent seeking and corruption presently weaken that potential.

The Corruption issue:

Despite several potential productive investments that could help to promote industrialisation in Tanzania - and margins for significant profits given the high level of rents granted in EPZ/SEZ - corruption and incentive misalignment reduces the benefits of this programme.

This research project therefore aims to understand the rents capture mechanisms in EPZ/SEZ, focusing on the opportunities to reduce corruption/rent-seeking offered by incentive restructuring and coalition building between powerful organisations in the private sector willing to invest in Tanzania, and government officials under pressure to deliver a more productive allocation of rents. In building this coalition, the project will address the organisational heterogeneity of firms within EPZ/SEZ and both market-constraining and state-constraining corruption dynamics.

Theory of Change:

  • IF current fiscal and non-fiscal incentives of the programmes can be restructured and fitted better to the needs of heterogeneous investors,
  • And IF compliance is more effectively enforced – also by organising collective action involving relevant authorities and private sector actors
  • THEN corruption and unproductive rent-seeking related to the EPZ/SEZ programmes can be significantly reduced and their contribution to the government’s industrialisation efforts increased
  • BECAUSE the restructured incentives and stronger collective action to ensure compliance will make the EPZ/SEZ programme more attractive for serious investors while at the same time discourage rent-seeking firms from getting access.

Research Methods:

A mixture of quantitative and qualitative analyses will be used. Specifically, we will use data from previous surveys. Aggregate and firm level data on exports, exemptions, employment, and other characteristic will be sought from EPZA, TRA and the National Bureau of Statistics.
However, given the scarcity of reliability of such data, and the special focus of ACE on rent processes, incentives and corruption, we will conduct our own questionnaire surveys – supplemented by focus group discussions and interviews with selected key stakeholders.

Partners: Antonio Andreoni (SOAS), Ole Therkildsen (DIIS), Deo Mushi (EconGroup)

Image: Dar es Salaam Port development panorama/ Le Korrigan

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