As the coronavirus (COVID-19) crisis continues to ruin economies around the world, countries are implementing various emergency tax and non-tax measures to support their economies during this crisis and ease the impact on both the businesses and individuals. Apart from the various administrative measures that TRA are taking, there are no emergency tax reforms that I am aware of in Tanzania (so far!). But what sort of tax relief measures other countries are taking? Various measures are being taken to suit individual countries situation. Some may seem overly expensive to implement and yet some are quite simple.
In response to the pandemic one of our closest neighbours, Kenya, has taken bold steps in reducing the tax rates for taxpayers. There is a 100 per cent tax relief for taxpayers earning a gross monthly income of up to KES 24,000 (around TZS 500,000). The upper band employment income tax (PAYE) rate has been reduced from 30 per cent to 25 per cent. Similarly, the resident corporate income tax rate is reduced from 30 per cent to 25 per cent. And the VAT rate from 16 per cent to 14 per cent.
Some countries have taken simpler steps but certainly helpful such as extending the time for filing tax returns. In Ghana, for example, the time for filing annual income tax return has been extended by 60 days. Also, Nigeria has extended the deadline for filing VAT and withholding tax returns from the 21st day to the last working day of the month, following the month of deduction. In Mauritius, taxpayers that are unable to submit returns or pay their tax due to the lockdown will not be charged any penalty or interest for late submission or payment. Amid the COVID-19 crisis, the extension of time to file returns makes a lot of sense.
It is no longer business as usual. There is a slowdown in business and processes. Given the various preventive measures that are taken to fight COVID-19 such as the full or partial lockdowns, it is likely to take longer for some business and individuals to get their tax returns prepared on time. In Tanzania, for example, monthly VAT returns are due 20 days after the month-end. What if this time is extended to 30 days (or to the last working day of the month)? Due to the pandemic, the collection of VAT from customers takes longer. An alternative to a blanket extension, reform can be made to allow those severely affected to apply for an extension - say up to some 90 days.
Also, the annual income tax return is due 6 months after the year-end. But annual income tax returns (for companies at least), must be accompanied by audited financial statements. statutory audits are likely to take longer than normal. There is already a provision to allow the extension, but this is currently capped at only 30 days. Probably 90 days cap would be much more helpful.
By Shabu Maurus, Tax Partner, Auditax International.