Final steps in tax amnesty

Friday January 11 2019

Shabu Maurus ,

Shabu Maurus ,  

Did you apply for a tax amnesty last year? You probably did. And now you are wondering what happened to your application.

You will recall that 30th November 2018 was the deadline for those who wished to apply for a tax amnesty. The tax amnesty application window was open for five months from July 1, 2018.

Back then the Minister of Finance and Planning issued “Tax Amnesty Order” (The Tax Administration (Remission of Interest and Penalty) Order, 2018) which was meant to govern the tax amnesty programme. The Tax Amnesty Order expired on December 31, 2018.

Under the Tax Amnesty Order, once TRA (the Commissioner General of Tanzania Revenue Authority) has decided to accept your application (accept to waive 100 per cent of interest and penalties), the next step is for the two parties, the taxpayer and TRA, to sign a settlement agreement. In the agreement, the taxpayer makes several commitments including the following three.

1. Payment of agreed tax within the agreed time

A commitment to make payment of the agreed principal amount of tax in a manner indicated in the agreement without default. And in the case of default, the TRA will proceed to demand the outstanding tax liability as if no remission was granted. The Tax Amnesty Order (Order 5(b)) essentially prescribes 30th June 2019 as the deadline to pay the principal tax.

2. No misrepresentation of facts

You also make a commitment that the declared tax liability is based on genuine facts, free of fraudulent or false facts and devoid of any misrepresentation. You also agree that in the event of discovery of any fraudulent or false facts or misrepresentation, TRA may demand full payment of remitted interest and penalties.

3. No further appeal against TRA

You will also make a commitment that the tax due is genuine, final and not subject of a further appeal. That is, you will not appeal against TRA in any court (including the tax courts) in respect of the tax liability that was a subject of your tax amnesty application.

The effect of the Settlement Agreement is that once the agreed obligations under each are full discharged by the parties no claims whatsoever shall arise against each either party. Also, the tax liability for the period in question shall be regarded as having been finally and conclusively discharged.

Some challenges

The Tax Amnesty Order required TRA to have decided on tax amnesty applications by December 31, 2018.

But this deadline has now already passed and, probably, you have not yet received any call from TRA to discuss the settlement agreement. So, what does that mean to you, the applicant? My guess is given the vast number of applications, TRA was unable to process all the applications by the deadline. If this was indeed the case, then hopefully you should receive a call from TRA in the next few days.

However, if we go by June 30, 2019 as the deadline to settle the principal tax, the delay means that applicants will have less time to settle their liabilities. This is not a big problem for smaller tax liabilities. However, for taxpayers with huge tax liabilities, it may be a challenge.

The shorter the time, the bigger the impact on their cash flow and operations. Also, my reading of the Tax Amnesty Order would put December 31, 2018 as a deadline for signing the Settlement Agreements.

This is the date the Tax Amnesty Order expired. If my reading is correct, then it may call into question the legality of Settlement Agreements entered after the expiry of the Tax Amnesty Order.