OPINION: Suggested changes to improve tax administration in Tanzania

Before the introduction of the Tax Administration Act, (TAA) in 2015, different tax types were administered under specific laws, and regulations.

It was difficult for taxpayers to bring together all those laws and therefore, the introduction of the TAA was a “breath of fresh air” to the taxpayers and consultants.

However, our current TAA, needs some improvement to make it more efficient. An area that is so to speak “top of my mind” is how we can improve our tax administration processes, which would in turn increase timely collection of tax by the government and decrease unnecessary anxiety and costs to the taxpayers.

The TAA has given some rights and obligations to the taxpayers and likewise to the Commissioner General (CG).

Of interest in this article is time limitation. The law is explicit on when taxpayers must respond to audit findings, information requests, tax decisions and proposals from the CG, without having similar time frames for the CG.

In my view, CG should also be given a time frame to respond to the taxpayers’ affairs.

Adam Smith, well known as, the father of modern economics, came up with the four principles of taxation in 1776, including, among others, the principle of certainty. According to Smith, in a good tax system, the tax which an individual has to pay should be certain and not arbitrary.

In other words a taxpayer needs to be clear on the time of payment, the manner of payment and the quantity to be paid.

In practice, before coming up with the tax liability, the revenue authority would conduct an audit on the taxpayers’ affairs. After completion of the audit, taxpayers would be provided with audit findings. Our tax laws requires the audited person to respond to the CG within fourteen days. However, these days can be extended up to twenty eight days upon giving reasonable cause to the CG.

Also, when the CG serves the taxpayer with a tax decision, our laws have given objection rights to the taxpayers if they are aggrieved by the CG’s decision to object within thirty days from the date they received the tax decision.

After receipt of the objection, the CG may call for additional information before making the final decision.

Where the CG intends to make a final decision, he shall serve a taxpayer with a proposed decision and the taxpayer shall respond within thirty days on his agreement or disagreement to that proposal.

After that stage, if the parties would still not be in agreement, tax dispute may be escalated to the Tax Revenue Appeals Board, the Tax Revenue Appeals Tribunal up to the Court of Appeal which is the pinnacle appellate body on tax matters. Any tax decision by the Court of Appeal is final.

Looking at our tax administration law and its regulations, there is nowhere the CG has been given a time frame to respond to the taxpayer on his tax position, on either audit findings, objections or submissions filed by the taxpayer.

This situation results in delays in finalising tax disputes which automatically delays timely collection of revenue to the government, and also exposes taxpayers to additional Tax liabilities.

The additional Tax liability is in the form of interest which continues to accrue for the duration the matter is still under dispute.

In my day to day work I do see situations where the penalties and interest are often more than the principal Tax.

In the interest of justice, when two people are in a dispute, the principal of equity demands that the status quo is maintained until the matter is dealt with by the appellate process. However our current system continues to punish those that seek justice via the appellate process.

Clearly, our current tax administration law on handling taxpayers’ affairs contravenes with the principle of certainty by Adam Smith.

It is time we introduce an amendment to the law, to compel the CG to respond to the taxpayers’ matters in timely manner.

Frank Mughwai is a Tax Manager at KPMG in Tanzania. Views expressed herein are those of the author