OPINION: What we learned from the tax amnesty programme

I know a lot of tax experts. None of the ones I spoke to, even old ones, remember the last time Tanzania had a tax amnesty. This probably means that we just concluded Tanzania’s first ever tax amnesty programme. Historic events such as these are opportunities for us to learn and reflect.

I consistently received two questions in the last six months: What do you think of the tax amnesty? And will the Tanzania Revenue Authority (TRA) extend the time for filing the applications? I will try to answer the first by way of three lessons we can draw from the amnesty program.

But it should not escape our attention that the program actually happened, was legislated, and taxpayers, in their droves, filed their applications. This, I think, is a win for tax compliance.

So what are these lessons?

Sensitivity to tax compliance is probably at its highest in Tanzania

It is no secret that the current government is intent on ensuring domestic revenue mobilisation is maximised. This naturally means that tax laws must be enforced with much greater intensity.

Tax payers are feeling this push, and in some instances they feel that that the revenue authority’s zeal for collection unfairly punishes them.

That being said, there is clearly an elevated level of interest in tax compliance. No one wants to be caught non-compliant.

We already know that CEOs and CFOs consider tax an important risk for their businesses.

However, we are seeing middle and lower level management in organisations pick up interest in tax. Indeed, even those who are not involved with taxation in their day to day lives are curious, which can only be a good thing.

The lesson here is that if something important (such as tax collections) gets the political backing, minds get concentrated and people begin to pay attention.

We just need to make sure that they are paying attention for the right reasons.

There is still a big gap in tax literacy

The problem with tax is that it is, in principle, deceptively simple. Calculate your profit, pay 30 per cent as income tax and pay/charge 18 per cent of whatever is being sold..! But for almost every tax rule, principle or formula, there is an exception and industry specific nuance to the treatment of each item that constitute ‘profit’ or ‘sales’.

As I assisted many clients and discussed with friends and colleagues as they looked at their affairs in order to determine if they are eligible for the amnesty, I noted that there is still so much tax illiteracy around.

This is a challenge to those reading this to familiarise yourself with the basics of what taxes are applicable in Tanzania, at least the ones that are applicable to you and your organisation.

Compliance should not be a firefighting exercise. If the two certainties of life are death and taxes, one should always have a doctor and a tax consultant.

In both cases, the experts should not be called when it is too late. Taxpayers would do well to regularly check their affairs to ensure compliance; a health-check will save you many troubles!

The ball is now on TRA’s court

It takes two to tango. Many taxpayers have put in significant effort to get their applications on time. They did that in the hope that their previous non-compliance, often as a result of oversight or lack of awareness of some requirement, will be rectified and the associated penalties remitted.

Some of them had actual contentions with TRA and may have objected to an assessment or even appealed in

court, these taxpayers were now willing to withdraw their appeals and seek amicable closure of pending cases. The onus is therefore on TRA to keep its end of the bargain.

There may also be taxpayers who refrained from making those applications. One reason could be that they could not make it in time.

Some may have been just nervous about being penalised for coming out to declare their liabilities. I believe the way TRA responds to the amnesty applications filed by those ‘brave’ taxpayers will nudge those that have not filed their applications to regularise their affairs.

With respect to an extension of time for applications, one thing you can be sure is that TRA offices will be extremely busy at the moment. This is of course TRA’s discretion, but there may be value, and no harm, in granting that extension so that more taxpayers are able to file their applications.

Samwel Ndandala is a senior manager with Deloitte Consulting. The views expressed herein are those of the author and do not necessarily represent the views of Deloitte.