Unanswered questions on the six-month objection timeline
By Omari Nina
In this world, nothing is certain except death and taxes” is a famous quote by Benjamin Franklin. But if Franklin had been involved in the tax dispute resolution process, he might have expanded this quote or produced a separate quote to the effect that there is nothing more uncertain than the determination of tax liability. Of course, we all have to pay taxes, but my experience is that it is close to impossible for both the taxpayer and revenue authority to assess the same amount of tax. This uncertainty of how much to pay results in another uncertainty as to when both the revenue authority and taxpayer will finally reach an agreed position.
Prior to the Finance Act 2020, there was no timeline for the Tanzania Revenue Authority (TRA) to respond to an objection to a tax assessment, something that taxpayers felt was dragging the dispute resolution process. When the Minister of Finance and Planning presented the budget for the fiscal year 2020/2021 proposing to introduce a six-month timeline for TRA to determine objections, taxpayers thought they had finally seen light at the end of the tunnel in terms of “fast tracking objections and appeals” (as mentioned in the budget).
The change introduced by the Finance Act 2020 was to require TRA to determine taxpayers’ objections within six months after “admission” of objections, otherwise the matter is deemed to be determined in accordance with the initial underlying tax assessment or decision of TRA. A taxpayer has the right to dispute a deemed determination (as applies to a normal determination) - namely to appeal to the Tax Revenue Appeals Board (TRAB) within timelines specified for an appeal.
Although the intention of this change was very positive, namely to encourage the timely resolution of objections (in line with the commitment in TRA’s Taxpayer’s Service Charter) there are a number of concerns. In particular, automatic determination in line with the original TRA position appears to assume that it is more likely than not that proposed adjustments are justified (i.e. benefit of doubt to the TRA not the taxpayer); in addition, it potentially creates a disincentive for TRA to determine objections, and de facto might pass on more work to the appellate bodies. Having said this, so far my experience is that this change has encouraged TRA to determine objections on a timely basis. A further concern is that unless some formal notification mechanism from TRA is instituted to notify a taxpayer of the impending deadline, it results in potential difficulty for taxpayers to monitor the six month deadline for filing an appeal (being the only mechanism to continue the dispute if the objection is deemed automatically determined).
To add some confusion to the mix, I am aware of a recent case where TRA disputed an appeal filed by a taxpayer following the lapse of the six-month time-limit on the basis that the deemed determination is not an appealable decision. Having come across this, a number of questions came to my mind including: What was the purpose of the change? Has the change achieved the intended goal? and What should a taxpayer do if TRA does not determine an objection within the required timeline if an appeal is considered void?
In my opinion, to better achieve the intended objectives, it is important to consider making two adjustments to the legislation: firstly, the benefit of doubt should be to the taxpayer so that the deemed determination is in accordance with the taxpayer’s objection (not the original TRA assessment); and secondly, making it obligatory for TRA to issue a letter of admission once all the conditions for admitting an assessment are met.
It is quite staggering to contrast the position of a taxpayer issued with an assessment, with that of the TRA in receipt of an objection. In the former case, if the taxpayer fails to object within thirty days, then the assessment is confirmed. On the other hand, if TRA does not respond to an objection within six months (i.e. six times longer than the taxpayers’ timeline), the original TRA assessment is still considered as confirmed (even though the delay is by TRA)! Ideally, a change should be made so that the deemed assessment following the six months is deemed amended in accordance with the taxpayer’s objection. Such an approach would align with the previous position under the Tax Revenue Appeals Act 2000 and would be consistent with the legislation in Zanzibar and in our neighboring countries (Kenya and Uganda).
The final concern relates to the timeline for TRA to issue an admission letter, bearing in mind that this is the starting point for measuring the six-month deadline. Although, in many cases TRA do issue a formal letter indicating admittance of an objection, there are other cases where no such letter is provided, but the objection process nevertheless continues. This begs the question: when does the six-month clock start counting? Is it when the objection is filed and conditions for admitting the objection are met or on the date of receipt of an admission letter? So a further proposed change would be to make it mandatory for TRA to issue a letter to admit objections once all conditions for admittance are met. In summary, while there is arguably nothing more uncertain than the determination of tax liability, some element of uncertainty could be removed from the tax dispute resolution process by some steps to “level the playing field” for taxpayers.
Omari Nina is a Senior Associate, Tax Services, at PwC Tanzania.
