In the Budget Speech a fortnight ago, the Minister for Finance presented various tax reforms proposals for the coming fiscal year (2019/2020). This was followed the Finance Bill 2019.
The Bill, if approved by the parliament, will become effective from 1st July 2019. Establishment of an independent Office of Tax Ombudsman (“OTO”) is one of the major tax reforms for the fiscal year 2019/2020 proposed by the Minister of Finance a fortnight ago.
The measure partly comes to answer various complaints frequently leveled against the tax administration.
The complaints against TRA raised during the recent meeting between the President and businesses is a good testimony.
You will probably recall that early June 2019, the President, His Excellence John Pombe Joseph Magufuli met the representatives of the business community from across Tanzania. Among other things, the President heard their various grievances.
And, expectedly, tax administration was one of the major issues raised. In some countries with OTO (or similar institution), the office has been particularly effective in identifying cases of corruption in the tax administration.
The existence of an independent tax ombudsman, an institution pioneered in Sweden, provides an independent recourse for taxpayers who are dissatisfied with the way they have been dealt with by the tax authority.
According to the Minister, OTO “will be responsible for receiving correct and unbiased information and complaints from taxpayers or other people with good intention against the administration of tax affairs by Tanzania Revenue Authority”. The OTO will be coordinated under the Ministry of Finance and Planning. Obviously, there are several questions regarding OTO that the Budget Speech, expectedly, did not cover. According to the Minister, OTO will have at least four major functions:
(a) Fight corruption
OTO will be receiving and working on corruption complaints against TRA officials. In my opinion, since, corruption is ultimately a criminal office, there is a need for clear alignment with the existing laws and institutions dealing with corruption.
(b) Arbitrary assessments
OTO will be receiving and working on complaints against TRA officials for issuing arbitrary assessments. The tax laws give TRA tremendous powers in tax administration. Some of the powers are prone to abuse by TRA officials. The power to issue tax assessments is one of them.
Issuance of arbitrary assessments can be linked with corruption.
But it can also be linked to desires by some TRA officials to meet their tax collection targets.
(c) Unlawful closure of businesses
Closure of businesses for tax reasons has in the past four years or so become prevalent in Tanzania. A practice that has been one of the major complaints by businesses. So, apart from complaints related to corruption and arbitrary assessments, OTO will be receiving and working on complaints from taxpayers against TRA officials for unlawful closure of their businesses.
(d) Tax administration
OTO will also be receiving and working on other complaints from taxpayers against TRA officials for other similar tax administration matters. In some countries with OTO (or similar institution), the office also deals with complaints related to delays or inaction by the tax administration. For example, delays in payment of tax refunds, delays in resolving objections, and delays in the finalization of audits or verifications.
How OTO will fit in the existing tax dispute resolution process? In his Speech, the Minister mentioned about the establishment of OTO.