The understanding of the tax dispute resolution mechanism in Tanzania has never been important given the current Government focus on tax collections and its zero-tolerance on non-compliance with tax laws.
While tax disputes are common, if not managed properly they can be costly to tax payers (both in terms of money and time).
Thus it is imperative for tax payers to have a thorough knowledge of the requirements of the tax laws to be able to manage tax disputes and reduce the tax exposures to their entities.
Tax disputes can also be costly to the Government through tying up a significant amount of tax collections which may be properly due. It is estimated that about Sh1 trillion is currently tied up in tax disputes in Tanzania.
Causes of tax disputes
In most cases tax disputes arise after a tax decision e.g. issuance of tax assessments which may be preceded by a tax audit.
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.
Tax dispute resolution mechanism in Tanzania
The opportunity by tax payers to challenge tax decisions is provided for in the Tanzania tax laws e.g. The Tax Revenue Appeals Act, 2000 and the Tax Administration Act, 2015. The mechanisms involve objections and appeals as follows:
i) Filing an Objection to the Commissioner General
If aggrieved by the TRA Commissioner General’s decision (which includes all other officers of TRA), a person may file an objection to the TRA Commissioner General within 30 days. This is an internal tax resolution mechanism and the first attempt to resolve a tax dispute.
Tax decisions which can be objected 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.
ii) Appeals to the Tax Revenue Appeals Board
If after an objection a tax payer is still not satisfied with the decision of the TRA Commissioner General, he may first appeal the tax decision externally to the Tax Revenue Appeals Board. The Board hears tax Appeals on disputes arising from revenue laws administered by the Tanzania Revenue Authority (TRA).
iii) Appeals to the Tax Revenue Appeals Tribunal
If the tax payer is still aggrieved after the decision of the Tax Revenue Appeals Board, he can appeal to the Tax Revenue Appeals Tribunal. This is the second chance of appeal and the Tax Revenue Appeals Tribunal hears Tax Appeals disputes arising from Tax Revenue Appeals Board.
iv) Appeals to the Court of Appeal
This is the third and final opportunity to resolve a tax dispute. Thus when a tax payer is not satisfied with the decision of the Tax Revenue Appeals Tribunal he can appeal against the decision to the Court of Appeal. The Court of Appeal will only entertain disputes on matters of tax laws.
While the tax authority may perceive the above procedures as delaying payment of tax which may be correctly due, they serve as a mechanism to protect the rights of tax payers especially when there is an arbitrary taxation by the tax authority. Overall, the mechanism for objecting and appealing against a tax decision is a key component of any sound tax system.
Mr Makundi is a partner with Auditax International