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TIA NEWSLETTER
“Education for Efficiency” Volume 2 Number 5 June 2019
TANZANIA INSTITUTE OF ACCOUNTANCY
TIA Newsletter
Dear readers,
Tanzania Institute of Accountancy (TIA) Newsletter is
now four years old, it has done a great job that is
worth congratulating. It has informed and reminded us
of numerous activities that were done in that period
oftime. We would like to see it continue informing us in
this period and the academic years to come. Let us
use it as a platform to not only inform us of the events
which have taken place in our Institution but also
publish short articles that will help in educating I would also like to see events taking place in our
members of our community indifferent aspects of life. campuses being covered in the Newsletter in order
I encourage each staff who is able to writearticles on to balance the scope of coverage. In order for this
their areas of expertise to do so in order to help in to happen TIA staff in those campuses need to
educating students, workers, and the general start writing; they can write either by reporting
community. issues on their environments or by writing
It is through publishing that academic life finds its educative articles that will help in portraying
essence, that is why our Newsletter has decided to
hidden values in their environments. Writing is a
provide a space for such articles, it is my sincere hope
skill, one needs to get as much exercise as possible
that TIA staff will use it effectively.
in order to become a good writer, those who are
Rector serious about becoming good writers have to use
Mr. Sefu Hamisi Chief Editor more reputable publications such as international
journals.
Mr. Thomson Sanga
Graphics Designer
Mr. Englibert Haule Member Thank you
Luciana Hembe(Rector)
Photos by
Lillian Mpanju-Rugaitika
Page 1
Volume 2 Number 5 June 2019
Tanzania Institute of Accountancy is one of the Technical States that apply this kind of tax policies do so with the intention of
Institutions in Tanzania, providing courses in Accountancy and attracting foreign deposits to strengthen their economy. Most of
other business related fields that are recognized by NACTE, the them are tiny nations with few natural or industrial resources. Their
National Council for Technical Education. Almost in all whole existence would be threatened were it not for the booming
accountancy and other business related fields there are modules financial industry growing in the shadow of foreign capital.
of public taxation, finance and economics taught at different levels Tax havens, also called offshore jurisdictions, have attracted an
of courses, the article called THE WAYS IN WHICH INTERNATIONAL increasing number of foreign investors, especially in recent decades.
OFFSHORE FINANCIAL CENTRES ARE USED IN TAX PLANNING Usually they are people and businesses fleeing their own country’s
PRACTICESwill provide knowledge and skills to the entire tax collecting voracity in search of a more favourable business
community of TIA and other interested members in the country. environment. This is not surprising, since in some countries with
those who wish to exploit the mechanisms the tax haven has
created. Page 2
FOCUS ON SCHOLARY ISSUES
THE WAYS IN WHICH INTERNATIONAL OFFSHORE FINANCIAL CENTRES ARE USED IN TAX PLANNING PRACTICES
This means that tax havens and OFCs are very different. • Luxembourg, which is the market leader in
Most importantly,the OFC community is very largely Undertakings for Collective Investments in Transferable
expatriate (at leasti in the smaller tax havens) and is Securities (UCITS) and is believed to be the largest
usually very mobile. This characteristic makes the offshore Eurobond issuer,[ although no official statistics
OFC community quite different from the tax haven confirm this.
community,and quite often leaves them in real or
potential conflict.That is because the tax haven • New Zealand, the most remote jurisdiction, has the
community is local and committed to their geographic advantage of being a true primary jurisdiction but with
space. The OFC community is international, a tough but practical regulatory regime. It is well
transient and only interested in following money.If money positioned for the Asian market but retains close ties
does,for any reason,leave a tax haven you can be to Europe.
fairly sure that the OFC community
will follow it very rapidly.The tax haven community, • Singapore has recently risen in stature as a centre
who are the real local populace, will be left for wealth management and ranked fourth in the world
behind to tend the wreckage. in the 2009 Global Financial Centres Index. The state
The list of jurisdictions considered by the IMF to is a hub for hedge funds and its private banking
be OFCs.Many offshore financial centres are current industry is growing at a rate of 30 per cent annually.
or former British colonies or Crown Dependencies, The following prominent offshore centres now specialise
and often refer to themselves simply as offshore in certain niche markets.
jurisdictions. By some measures, there are more
countries that are offshore financial centres than • Bahamas, which has a considerable number of
not but the following jurisdictions are considered registered vessels. The Bahamas used to be the
the major destinations for offshore finance; dominant force in the offshore financial world, but fell
from favour in 1970s after independence.
• Mauritius is used for both inward and outward
investment platform for Asian, African and European • Panama, which is a significant international maritime
countries, it has the effective commercial and legal centre. Although Panama (with Bermuda) was one of
infrastructure required to support the development the earliest offshore corporate domiciles, Panama lost
of a global network. The island nation has a significance in the early 1990s.Panama is now second
number of double taxation agreements and is listed only to the British Virgin Islands in volumes of
on the OECD list of jurisdictions that have incorporation.
substantially implemented internationally agreed tax
and transparency standards.
• Bermuda, which is market leader for captive Reputation and standards of regulation vary across the
insurance, and also has a strong presence in range of offshore centres. The 2010 Global Financial Centres
offshore funds and aircraft registration.
Index (GFCI) gathers data on all International Financial
Centres and lists the following, in order, as the world's five
• British Virgin Islands, which has the largest
leading offshore finance centres: Jersey, Guernsey, Isle of
number of offshore companies.
Man, Bermuda Bermuda and Cayman Islands.In December
• Cayman Islands, which has the largest value of
2009 a group of professional services firms and businesses
Assets under management in offshore funds, and is
with offices in the GFCI's leading offshore financial centres,
also the strongest presence in the U.S. established the International Financial Centres Forum (IFC
securitisation market. Forum.
TIA KIGOMA
TIA MTWARA
Page 4
TIA Newsletter
TIA Campuses as seen in Tanzania Map Miss Tanzania 2018 Miss Queenelizabeth receiving a certificate of appreciation from the Director
of Academic afairs Ms Luciana Hembe at a ceremony held at TIA Main Campus
Tia Students enjoying in our spacious computer Laboratory Tia Students in Library
TIA students attending a computer class Miss Tanzania 2018 Ms Queenelizabeth Makune acknowleding enterpreneurship
activities done by her fellow students at TIA main Campus
Students Participating in TIA 2018 Convocation
Page 6
TIA Newsletter
Page 7
Volume 2 Number 5 June 2019
Page 8
TIA Newsletter Volume 2 Number 5 June 2019
1.GENERAL APPROACH
Some of the Committee’s witnesses highlighted the use of the WTO (World Trade Organization) and the OECD (Organization for
aggressive tax planning strategies by multinational Economic Co-operation and Development).
corporations. The multinational corporations use bank
accounts in offshore financial centres to transfer money to Another common reason for resorting to foreign banks is the pursuit
other parts of the world, and that they use tax avoidance of financial stability. People living in countries with high inflation,
techniques to remain competitive with corporations that with a weak national currency or in a politically, socially and
use similar techniques. The OECD noted that multinational economically unstable setting, often seek shelter for their savings in
corporations use tax havens and offshore financial centres a reliable international financial centre. Many individuals and
due to relatively lower regulatory standards. It provided companies transfer capital to tax havens to benefit from the tax
the example of an insurance company created by a U.S. advantages they offer and enjoy a higher level of privacy.
parent corporation in an offshore financial centre to
provide insurance services solely to the parent 3.FOREIGN BANKS
corporation, as well as to its U.S. and foreign subsidiaries.
It is precisely in tax havens, and to a smaller degree in other major
Accountability Research Corporation indicated that the
financial centers, where we find a particular type of foreign banks,
new International Financial Reporting Standards legitimize
which are known as offshore banks. Such banks are targeted to
the under-reporting of income by publicly traded
citizens and non-resident companies and are regulated by special
corporations for tax purposes. It highlighted the adoption
offshore banking laws. These do not only remove most of the
of the these standards by the CRA without debate in
limitations imposed on traditional banks, such as exchange controls
Canada, as well as the drafting and approval of these
and on foreign transactions, but they also exempt both the deposited
standards by organizations interested in maximizing
capital and the corresponding interests from tax.
investment returns for their clients, which may lead to
The other banks, including both those in the country of residence as
aggressive tax planning and decreased tax revenue in the
well as traditional foreign banks, are not covered by these special
future.
laws, therefore we may define them as onshore banks. As for the
Brigitte Alepin, a chartered accountant with Agora Services
different types of banks that exist (whether they are onshore or
de Fiscalité Inc. who appeared on her own behalf, argued
offshore institutions), we could classify them by line of business.
for a balance between, on one hand, restricting certain
Thus we have:
transactions due to tax evasion committed in tax havens
by individuals, corporations and trusts and, on the other
Central Banks: They issue the national currencies of the different
hand, legitimate tax planning transactions in the same countries and define their monetary policies.
jurisdictions by multinational corporations. Correspondent banks. They are banks that provide services to other
banks within a country. The intervention of correspondent banks is
A Department of Finance official noted that Bill C-48, An very common in international transfers, especially when changes of
Act to amend the Income Tax Act, the Excise Tax Act, the currency are made.
Federal-Provincial Fiscal Arrangements Act, the First
Nations Goods and Services Tax Act and related legislation, Investment Banks: They operate in the stock and financial
contains measures that would limit the use of foreign markets. They are basically engaged in the sale of shares, the
investment entities, non-resident trusts and foreign tax management of mutual funds and the search of finance for large
credit generators to avoid and reduce the taxation of companies. Within this group we can find the so-called private banks,
income in Canada. focussed on people with large financial resources, offering them a
more personalized service. Many offshore banks are in fact private
banks.
2. CAPITAL FLIGHT
This capital flight, of course, is not viewed favourably by
tax officials of the countries that suffer from it, as in the
Corporate or Business Banks: They specialize in medium and
end an important part of their tax revenue gets away. large companies to which they provide services related to trade such
Therefore, they have tried to react with different measures as loans, letters of credit, etc...
to hinder the transfer of assets to tax havens or to make it Commercial or retail banks. They are the “regular” banks we all use
unattractive.But the new world order that emerged with and whose main customers are individuals and small businesses.
the globalization of the economy makes it difficult to exert Opening current and savings accounts, writing checks, granting
effective control over the movement of money. Trying to mortgage loans and consumer credit, and so on, are among their
hinder the free flow of capital clashes with the claims of most common services.
global trade liberalization, which is defended by, besides
most companies and governments, also by such important
institutions as the World Bank,
Page 9
Volume 2 Number 5 June 2019
THE WAYS IN WHICH INTERNATIONAL OFFSHORE FINANCIAL CENTRES ARE USED IN TAX PLANNING PRACTICES
Savings Banks:They operate the same way as regular As an example of this approach, the Halifax Initiative mentioned
retail banks, but usually dedicate their profits to charitable international mining companies operating in Zambia that have
causes. Many have public capital or have originated from allegedly unprofitable affiliates in that country. To reduce the
foundations established by people committed to good shifting of profits, Global Financial Integrity and the Halifax Initiative
causes. They are very popular in Europe. advocated country-by-country reporting of sales, profits, tax paid,
the number of employees and costs for all multinational
Postal Banks:They operate in a similar way to savings corporations. Similarly, Brigitte Alepin and Arthur Cockfield
banks, but they depend on the postal service. In some proposed that country-specific information be submitted to the CRA
countries such as Switzerland, they are eligible under in order to reduce tax avoidance by multinational corporations.
specific legislation and they are very creditworthy
institutions. 5. DOUBLE TAXATION TREATIES
A number of the Committee’s witnesses indicated that bilateral tax
Ethical Banks:They are created by individuals and treaties designed to reduce the double taxation of income or double
institutions critical of the financial and monetary system. taxation treaties actually promote tax avoidance and evasion by
One of the highlights is that they invest in ethical and Canadian corporations. Alain Deneault, a researcher at the
environmentally defensible projects. University of Quebec at Montreal who appeared on his own behalf,
provided the example of the Canada–Barbados double taxation
Islamic Banks: These are institutions created to meet treaty, which he felt promotes the reporting of higher expenses by
Islamic law (sharia), which prohibits operations such as the multinational corporations in Canada through inflated prices for
payment and collection of interest, considering the intra-firm transactions, thereby lowering Canadian taxable income.
practice as usury. The Quebec Association for the Taxation of Financial Transactions
Finally, we must not forget a host of licensed institutions for the Aid of Citizens had similar views on the Canada–Barbados
that perform similar activities to banks but do not need a double taxation treaty, and said that the treaty enables profit
full banking license to practice. They are usually private shifting and reduces the amount of Canadian tax revenue.
cooperatives, seeking to provide better conditions for its
members. The best known are the so called Building 6. INSURANCE
Societies, especially focused on mortgages, or the Credit A number of offshore jurisdictions promote the
Unions. incorporation of captive insurance companies within the
Note that the classification we have made should not be jurisdiction to allow the sponsor to manage risk. In more
taken strictly. Many banks perform different functions and sophisticated offshore insurance markets, onshore
it is not uncommon to find institutions that offer insurance companies can also establish an offshore
commercial services to individuals, but also corporations, subsidiary in the jurisdiction to reinsure certain risks
operating as investment or correspondent banks, and so underwritten by the onshore parent, and thereby reduce
on. They are the large financial groups which often
combine these different activities because they have overall reserve and capital requirements. Onshore
specialized departments for each type of service. reinsurance companies may also incorporate an offshore
subsidiary to reinsure catastrophic risks.
In conclusion I can say that foreign banks, especially
offshore banks, offer many interesting opportunities for 7.COLLECTIVE INVESTMENT VEHICLES
investment and savings. The possibilities of each person
Many offshore jurisdictions specialise in the formation of collective
and the benefits they can get will depend, to a greater
investment schemes, or mutual funds. The market leader is the
extent, on their financial capacity, their place of residence
Cayman Islands, estimated to house about 75% of world’s hedge
and the type of institution chosen for this purpose.
funds and nearly half the industry's estimated $1.1 trillion of assets
under management, followed by Bermuda, although a market shift
4. PROFIT SHIFTING AND TRANSFER PRICING has meant that a number of hedge funds are now formed in the
Regarding the use of transfer pricing, the CRA informed British Virgin Islands. As at year end 2005, there were 7,106 hedge
the Committee that transfer pricing occurs in all sectors, funds registered in the Cayman Islands, 2,372 hedge funds in the
and is used by both large and small corporations. Global British Virgin Islands and 1,182 in Bermuda. These figures do not
Financial Integrity noted that transfer pricing is used by include other collective investment vehicles. See also the recent
multinational corporations to under-report income in survey by Deloitte in Hedgeweek.
developing countries, thereby lowering the tax base of
those countries. Page 10
TIA Newsletter Volume 2 Number 5 June 2019
THE WAYS IN WHICH INTERNATIONAL OFFSHORE FINANCIAL CENTRES ARE USED IN TAX PLANNING PRACTICES
Page 11
Volume 2 Number 5 June 2019
THE WAYS IN WHICH INTERNATIONAL OFFSHORE FINANCIAL CENTRES ARE USED IN TAX PLANNING PRACTICES
Bonds are among the highly popular investment options
under debt as an asset class. Simply put, bond is a debt References
investment under which investors gives money to the 1)Natarajan, Mangai (2010-11-15). International Crime and Justice. Cambridge
issuer for a pre-defined period at a specified rate of University Press. ISBN 9781139492379.
interest. This implies that the investor has given a loan to
the issuing entity, and will be repaid at the end of the 2)https://www.irs.gov/uac/Offshore-Tax-Avoidance-and-IRS-Compliance-
specified tenure. Bonds or Debentures are generally Efforts
issued by corporates, government for the purpose of 3)Unger, Brigitte (2014-01-01). Bruinsma, Gerben; Weisburd, David, eds.
raising money to fund their activities & projects. Bonds Money Laundering. Springer New York. pp. 3137–3144. ISBN 9781461456896.
provide corporates & governments an alternate channel
to meet their fund requirement. The tax implications of 4)In other countries no difference so long as you are resident and domiciled
bonds defer depending on the type of Bonds, however there (for example, the United Kingdom)
these bonds are exempt from Wealth Tax under Wealth
5)"Havens for Tax Evasion". The New York Times. 2008-03-11. Retrieved
Tax Act, 1957. There are various classifications of bonds/ 2012-02-20.
debentures. The types of bonds/debentures from the 6)"Banking Statistics (Cayman)". Cayman Islands Monetary Authority.
investor's perspective are listed below: Retrieved 20 October 2014.
Dr Kasambala M.
BSc. Agric. General, MSc. Agric. Economics and PhD in Economics.
Tanzania Institute of Accountancy (TIA), P. o. Box 9522, Dar es salaam, Tanzania.
Email:irenekasambala@yahoo.com
Abstract
Savings and Credit Cooperative Societies Whereas the results from the cross tabulation reveals
(SACCOS) are registered organization that are that SACCOS members possess a significant higher
formed to impart a saving spirit and extend amount of properties as compared to non-members.
loans to the members based on individual The findings from the regression analysis concluded
requirement and society rules and regulations in that SACCOS members own more assets due to
relation to their savings. They are societies that acquisition of credit and thus stands in a better
mobilize savings and speed up investment by position for accumulation of wealth than the non-
allowing its members to access loans and invest members. The study recommends that more people
for income generation and thereby contributing should join in SACCOS in order to save in a pool and
to poverty reduction. The poor living condition access loans at low cost and with little or no collateral
of the people is associated with little or at all for investment and hence reducing poverty and
inadequate capital for investment purposes. This improves their well-being. As a policy implication the
paper investigates the economic benefits of study calls for the formation of more SACCOS where
SACCOS on the well-being of the individual. The people can acquire capital for investment purposes
study used regression analysis and descriptive and thereby contributing to industrial economy; which
statistics, where collected information were is the focus of the Nation of Tanzania today.
analyzed using ordinary least square (OLS)
regression, cross tabulation and independent t-
test. In the independent t-test means of the
investment capitals for both SACCOS members Keywords:
and non-members were compared. The results SACCOS, Economic benefits, well-being of SACCOS
indicate that means of the investment capital members, investment capital
employed in the business enterprises are not the
same between SACCOS members and non
members. The average investment capital was
higher for members and lower for non members.
The results from t-test were supported by Eta
squared estimates that shows the magnitude of
the effect of investment capital on the business
enterprises of both SACCOS members and non-
members. Page 13
Volume 2 Number 5 June 2019
Page 14
TIA Newsletter Volume 2 Number 5 June 2019
Page 15
TIA NEW STAFFS
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Tanzania Institute of Accountancy (TIA) Newsletter
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