A fortnight ago, Tanzania’s Minister of Finance read his Budget Speech for the fiscal year 2020/21. Several tax reforms were announced and included in the bill to the Finance Act,2020 (“Finance Bill”). One of the areas that the Minister proposed to reform is the tax dispute resolution in the tax administration law. Part of a paragraph under the “Objects and Reasons” of the Finance Bill reads “the Bill proposes amendments to sections 50, 51 and 52 to ensure that there is efficient and effective procedure in the determination of tax objections”.
In exercising its statutory powers to administer tax laws in Tanzania, the tax authority (TRA) makes various decisions including decisions over the amount of tax that should be paid by a taxpayer. There are various good reasons as to why a taxpayer may disagree with a decision or decisions made by the tax authority against that taxpayer. It could be because the taxpayer believes that TRA's interpretation of the tax law is flawed. It could be a dispute on facts or the accuracy of TRA's tax calculation. It could be an incorrect application of the law or even in some cases, wrong tax law has been applied. Of course, there are also "bad" reasons a taxpayer may disagree with TRA's decision. A taxpayer may not fully understand the tax law, or he may not have money to pay the demanded tax. And yet, other taxpayers may not fully comprehend why the government should take away from them their hard-labored money.
Generally, if a taxpayer disagrees with the TRA’s decision he is entitled, as a first step, to object against the decision to TRA. If the tax dispute is not fully resolved at TRA level, the tax administration laws provide for a three-tier appeal system: The Tax Revenue Appeals Board (‘Board’), the Tax Revenue Appeals Tribunal and the Court of Appeal. But taxpayers could not exercise his right to appeal until TRA determines his objection. But the tax administration laws, unfortunately, did not prescribe a specific time for TRA to determine objections. In fact, no time frame was set for resolution or decision of tax disputes at any level. And so, tax disputes can potentially take years to resolve at each level, sometimes to the detriment of taxpayers. Once a taxpayer has filed an objection or appeal within the prescribed time (usually 30 days for objections), there is so little that taxpayers can do to speed up a tax dispute resolution process.
The reform proposed by the Minister come to partially change this anomaly. The law now sets a time limit for TRA to resolve taxpayers’ objections. Six months at a maximum. If TRA fails to determine an objection within the six months window, the aggrieved taxpayer is free to exercise his right to appeal. But apart from setting the time limit for TRA, the amendments also set some stringent restrictions and conditions to taxpayers. For example, if TRA request information or documents from any person (even if not liable to tax), such person needs to submit the requested information within 14 days. If such person fails to submit the requested information or documents within that time, then the law restricts that person from using such document or information as evidence at objection or appeal stage. Also, taxpayers must now submit all documents or information they indent to use as evidence against TRA’s decision (e.g. an assessment) at the time of lodging objection. Short of that, such documents or information cannot be relied upon at the time of appeal. There is also an amendment to the effect that a taxpayer cannot object or appeal on any matter decided under any tax law on account of agreement, consent, or admission.
By Shabu Maurus, Tax Partner, Auditax International.