Tanzania in International Tax Law: Clearing up the fog in tax treaty domestication

Divergent views exist as to how Tanzania’s Double Tax Treaties (DTTs) are domesticated (incorporated) into Tanzanian domestic law. By way of a brief recap, in last week’s article, I discussed the nexus between DTTs and the Tanzanian Income Tax Act, 2004 (ITA-2004). In this week’s article, I discuss the issue of ‘domesticating’ DTTs, which in turn impacts the eligibility to claim tax treaty benefits and the timing of such claim as well as the application of the treaty overriding provision of section 128(1) in the ITA-2004.
The construal of, and the interaction between, Articles 63 and 64 of the Constitution of the United Republic of Tanzania, 1977 (‘the Constitution’) and section 128 of the ITA-2004 is the lynchpin of the discussion on how DTTs are domesticated into Tanzanian law. Article 63(3) (d) and (e) of the Constitution provides that, in discharging its function, the National Assembly “may enact law where implementation requires legislation [and] deliberate upon and ratify all treaties and agreements to which the United Republic is a party and the provisions of which require ratification”. Article 64(1) provides that legislative power over, inter alia, all Union Matters (one of which is income tax) is vested in Parliament.
In terms of Article 64(5) of the Constitution, if any other law conflicts with the Constitution, the Constitution shall take precedence and that other law shall be void to the extent of its consistency with the Constitution.
On the other hand, section 128 of the ITA-2004 envisages that Tanzania may be a party to an international agreement—defined under subsection 6 of that provision as “a treaty or other agreement with a foreign government that has entered into force in the United Republic providing for (a) relief of international double taxation and the prevention of fiscal evasion; or (b) reciprocal administrative assistance in the enforcement of tax liabilities”. Actually DTTs entered into by Tanzania are an example of such international agreements.

For example, article 30 of the Canada-Tanzania Income and Capital Tax Treaty (1995) requires ratification and the exchange of the instruments of ratification for the entry into force of the treaty.
It is generally accepted that Tanzania is bound, in the international realm, after a DTT has been ratified.
But does the DTT become part of Tanzanian domestic law on being ratified by the National Assembly? Stated differently, is there a further step required for the DTT to take effect as part Tanzania domestic law? Tanzania is a dualistic country in which international and domestic laws comprise distinct legal systems.
Thus, unless DTTs are self-executing, they have no legal effect until they are domesticated.
In a fantastic article, titled ‘Treaty Making and Incorporation in Tanzania,’ Dr. B. T. Mapunda of the University of Dar es Salaam’s School of Law shares insights into the manner in which treaties may be domesticated into Tanzania. [Eastern Africa Law Review (2003)]. According to Dr. Mapunda, there are three methods by which treaties may be domesticated. First, a treaty can be domesticated by an Implementation Act that gives effect to the whole treaty.
Second, a treaty may be domesticated by making an independent enactment with the relevant treaty being included as a schedule, or third, enacting legislation that follows the model of the treaty and incorporating either the whole treaty or just particular articles of it.

Tanzania in International Tax Law: Clearing up the fog in tax treaty domestication

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