MANAGING TAX RISKS : Tax disputes resolution in Tanzania

 Last week’s article discussed tax dispute resolution mechanism in Tanzania with a focus on tax assessments. We highlighted the power of the Commissioner General to issue tax assessments and the manner in which a notice of assessment should be served to a tax payer.

We noted that it is only when an assessment has been served on the tax payer as per the requirements of the tax laws, the tax payer will be deemed to have been informed of his/her tax liability.

When a notice of assessment has not been served as per the requirement of the law this may form a ground for objection and appeal in case the objection is not successful. We also underscored the need for the tax payer to institute controls which can provide evidence regarding receipts/delivery of notice of assessment.

Today’s article looks at tax objections as the first attempt by a tax payer to resolve a tax dispute.

When can a tax payer file a tax objection?

Under the Tax Administration Act, 2015 and the Tax Revenue Appeals Act, 2000 if a person is aggrieved by Tanzania Revenue Authority Commissioner General’s decision he may file an objection to the Commissioner General. This is an internal dispute resolution mechanism (done within TRA) and although there is no an independent body within TRA to deal with objections, experience has shown that when used properly it can be an effective tax dispute resolution mechanism.

Tax decisions

Commissioner General’s tax decisions include assessments, or other decisions or omissions on a matter left to the discretion, judgment, direction, opinion, approval, consent, satisfaction or determination under a tax law. However, Practice Notes (their issuance/refusal/revocation), decision affecting TRA officials in their capacity, and compoundment of offence are not tax decisions and thus cannot be objected. A tax decision is evidenced by tax return for self-assessment, a notice of assessment for other assessments or a written notice for other tax decisions. It is imperative for the tax payer to confirm that a tax decision has actually been made before making a decision on filing an objection.

Examples of matters which can lead to an Objection

There are various causes of tax disputes including incorrect/arbitrary application of the tax laws by tax officers; issuing tax assessments using incorrect information or without consideration of tax paid; time barred assessments (assessments issued outside the allowed timeframe by the tax laws); mistakes in computation of tax liability; assessments not served to the tax payer as per the requirement of the tax laws; issuing an assessment to a wrong person or entity etc.

Timeframe for filing an objection

Objections to tax decisions must be filed with TRA within 30 days from the date of service of the notice of assessment i.e. from the date when the decision was served to the person as per the requirement of the law. However, if reasonable grounds exist, a person may apply for extension of time to object.

Requirement to make a deposit payment

Objections are admitted after payment of a deposit which is the higher of 1/3 of assessed tax or undisputed tax. However, if good reasons exist, the Commissioner General may waive or accept a lesser amount of deposit. Examples of reasons which can be deemed as good reasons include financial difficulties, uncertainty around law or fact or equity consideration.

Format of the Objection

Normally tax objections must be in writing and must state grounds for objection. The Tax Revenue Appeals Act, 2000 stipulates that an objection should be a statement in a precise form, of the grounds in respect of which the objection to an assessment is made.

Mr Makundi is a partner with Auditax International