By FARAJA MGWABATI, 10th May 2011 @ 13:00, Total Comments: 0, Hits: 123 DAILY NEWS THE International Monetary Fund (IMF) has urged the Tanzanian government to increase tax on mining activities as a strategy to boost revenue collection to meet its budgetary obligations. Strengthening value-added tax (VAT) compliance and enhancing the taxation of the mining sector will be a big boost to revenue mobilisation, said the IMF Executive Board assessment of the economy through Article IV Consultation instrument with the government on Tuesday. The mining sector contributes about 52 per cent of countrys export but it only accounts for three per cent of the countrys Gross Domestic Product (GDP). The board reiterated its stance on broadening of the tax base, reducing exemptions and improving public financial management. According to the study named Informal Sector Taxation conducted recently by an assistant research fellow with Economic and Social Research Foundation (ESRF), Mr Apronius Mbilinyi, the government is losing heavily for failure to tax the informal sector. The study shows that revenues lost as income tax amounts to between 35 and 55 per cent of the total tax revenue. Sectors such as transport, real estate and consultancy are among those getting away without paying income tax. While medium-term economic prospects remain favourable, Directors have encouraged the authorities to press ahead with essential fiscal consolidation and structural reforms to sustain pro-poor growth and employment over the medium term. While recognising that high fuel prices, weather-related supply shocks and shortfalls in donor aid could complicate near-term fiscal management, we encourage the authorities to continue to streamline current spending by trimming the wage bill, they said. IMF also has called on authorities to align spending more closely with available resources and tightening existing commitment controls to help prevent the re-emergence of arrears like what happened in the previous budget. The Bretton Woods institution has encouraged the authorities to expeditiously complete their debt management strategy and maintain a cautious approach to non-concessional borrowing to ensure debt sustainability over the medium term. In this context, we stress the need to carefully select projects financed with no concessional borrowing through rigorous costbenefit analysis, the board added. Meanwhile, Finance and Economic Affairs Minister Mustafa Mkulo has said that the country was still within acceptable levels of borrowing and that the same had been proved by a study by the IMF. He told reporters in Dodoma on Monday that the Bretton Woods institutions were aware that the government borrowed within acceptable terms and for development projects. The ministers position came following an IMF caution early this month that the government of Tanzania could be borrowing for recurrent expenditures, warning that debt levels will rise rapidly. Mr Mkulo said, What IMF was saying is that the government should not borrow on commercial terms to finance recurrent expenditure. As the finance minister, I agree with that. Tanzanias national budget for financial year 2011/2012 is 11.9trl/-, out of which 7.3trl/- is meant for recurrent votes, while 4.5tr/- is allocated for development programmes and projects.