Tanzania in International Tax Law: Does the doctrine of legitimate expectation apply in Tanzanian taxation?

Friday May 15 2020



PAUL KIBUUKA tax@paulkibuuka.com 


Following last week’s article about private rulings issued by the Commissioner General of the Tanzania Revenue Authority (TRA) which bind the Commissioner General as against the specific taxpayer to whom the ruling is issued, I consider in this week’s article the further hot-button issue of whether the doctrine of legitimate expectation applies to Tanzanian taxation to prevent the Commissioner General from reneging from his previous private ruling. 
From this issue, a number of sub-issues are derived: the attitude of Tanzania’s tax adjudication bodies, including the Court of Appeal, towards the doctrine of legitimate expectation; the circumstances in which the doctrine may apply without violating Tanzanian tax law; and the key takeaway message for taxpayers in Tanzania from the doctrine.
Because of the limited space, I can only provide a high-level consideration of the above issue and sub-issues.
The doctrine of legitimate expectation, ushered in by the best-known British judge Lord Denning in 1969, forms part of the law of Tanzania and the courts have cognizance of it (see, Simeon Manyaki v. IFM (1984) TLR 304; and Mohamed Jawadi Mrouch v. The Minister of Home Affairs (1996) TLR 142).
The idea behind the doctrine is that public authorities are bound by their representations, undertakings and assurances which induced private firms and individuals, including investors, to act in a certain way.
Derived from the need to promote legal certainty, a basic tenant of the rule of law, the doctrine appears to have been preceded by the principle of legality in Tanzanian jurisprudence. 
In determining whether there is a legitimate expectation, the courts normally consider the reasonableness of the expectation (that is, a benefit, relief or remedy) and whether that expectation is legitimate. Thus, there are two facets of the doctrine, namely procedural legitimate expectation and substantive legitimate expectation.
Tanzanian statutes are a powerful restraint upon applying the doctrine of legitimate expectation. In Republic vs Mwesige Godfrey and Another Criminal Appeal No. 355 of 2014 (“the Mwesige case”), the Court of Appeal of Tanzania (“the Court”) stated that “the Court must always presume that what a legislature says in a statute means what it says there”. 
The Court of Appeal has taken an increasingly strict interpretation of the words of a tax statute, although it has also applied a purposive interpretation whenever possible.  
Thus, in Geita Gold Mining Limited v. Commissioner General TRA Civil Appeal No. 132 of 2017 (“the Geita Gold Mine case) , the Court rejected the Applicant’s legitimate expectation claim that the contractors working its mines would benefit from the remission of excise duty and fuel levy on fuel under the Mining Development Agreement (MDA) signed between the Applicant and the Tanzanian government.
The Court rejected the claim because the Applicant’s act of allowing the contractors’ use of the tax-exempt fuel was contrary to the conditions set in the MDA that is itself subject to tax statutes and regulations requiring payment of taxes when they are due. The Court then held that the Commissioner General’s demand for payment of Sh2,039,696,116.00 in taxes by the Applicant was lawful.
In this case, the provisions of Tanzanian tax statutes and regulations triumphed over the doctrine of legitimate expectation. Instructively, in referring to its own earlier decision in BP Tanzania v. Commissioner General TRA Civil Appeal No. 125 of 2015 and the Mwesige case, the Court said:
“The bottom-line consideration is the language of the particular statute and that when its language is plain, the Court need not go out of its way and interpolate,” further adopting the view in Resolute Tanzania Limited v. Commissioner General TRA Civil Appeal No. 125 of 2017 that “…in taxing one has to look merely at what is clearly said. There is no equity about tax. There is no presumption as to tax. Nothing is to be read in, nothing to be implied…”
That is the attitude of the Court of Appeal of Tanzania whose decisions bind the Tax Revenue Appeals Tribunal and the Tax Revenue Appeals Board in the face of some permissive and discretionary powers in taxation which call for fairness and therefore a basis for applying the doctrine of legitimate expectation to prevent the Commissioner General from reneging from his private ruling without violating the relevant Tanzanian tax laws. As I wrote in last week’s article, stability and tax certainty is often a condition for increased foreign investment.
In the end, contrary to popular belief, the strict interpretation of the words of a statute does not outrightly negate the doctrine of legitimate expectation, but rather it limits the doctrine when the language of the provisions of the law impose a mandatory duty. 
Paul Kibuuka (tax@paulkibuuka.com), a tax and corporate lawyer and tax policy analyst, is the CEO of Isidora & Company and the Executive Director of the Taxation and Development Research Bureau.