Africa-Press – Tanzania. THE CAG report of 2017/2018 noted that excessive litigation in tax matters gravely delayed the collection of taxes in our country. The report contended that a pileup of tax disputes in tax appellate avenues had egregiously impended TRA tax collection targets.
Impliedly, the report recommended that right and power-based tax dispute resolution were flawed. As a result, the report suggested efficient tax dispute resolution which would lessen the number of tax cases determined through adversarial procedures.
Particularly, a tax dispute occurs when the tax authority and the taxpayer have divergent views on the taxpayer’s liability. The divergent views are occasioned either by poor interpretation of statutes or tax avoidance. Realistically, TRA uses self-assessment in accordance with Section 46 of Cap 438 [RE: 2020] to enhance voluntary compliance.
Normally, the taxpayers will determine their tax liability directly, without any intervention from TRA. However, TRA has statutory power to examine the taxpayers’ return to determine whether the taxpayer correctly assessed or reported his tax liability. In so doing, the commissioner must serve a notice of assessment to a taxpayer in a manner provided under section 49 of Cap 438[RE 2020] wherever an intention to make an assessment is deemed.
Thus, incorrect assessment and a wrongly reported tax liability are curable through adjusted assessment. Eventually, a tax dispute arises where TRA identifies a possible misapplication of law or inconsistency in the tax return from the taxpayer. However, the taxpayer’s attention must be called to respond to issues identified in the TRA’s assessment.
In case, the taxpayer agrees on the TRA claim or the misapplication of tax law on his part and there exists some tax liability, the self-assessment initially submitted is amended and the commissioner issues the taxpayer with a written notice setting out the amendment and amount of tax due.
Similarly, where the taxpayer doesn’t agree to the TRA findings, the commissioner will still amend the assessment and issue the taxpayer with a written notice setting out the amendment and amount of tax due.
At this point, the taxpayer can dispute the commissioner’s tax decision in whole or in part by filing a notice of objection against that decision in writing within 30 days from the date of service of the tax decision. This is done based on the grounds of the objection in accordance with 51 (4) of Cap 438 [RE: 2020].
Normally, the possible grounds of objection could be a misinterpretation of a specific provision of the law or lack of cognizance to another law to which an audit of the taxpayer’s return would not result in the Commissioner’s assessment decision. The taxpayer aggrieved with the commissioner tax decision may appeal to the Board in accordance with section 16 (1) of Tax Revenue Appeals Act Cap 408 [RE: 2021].
In so doing, the taxpayer is required to serve a notice of appeal within thirty days following the date on which a notice of final determination of assessment of tax was served to him.
The appeal is required to be lodged by the taxpayer with the Board within forty-five days following the date on which a notice of final determination of assessment of tax is served on the appellant. In making his case, the taxpayer may show that in naming, blaming and claiming, the commissioner erroneously applied the law or wrongly interpreted a provision.
This is the reason why tax disputes are usually about ‘Perceived Erroneous Applications of the Law’ (PEALs). On the other hand, the Board rules provide that where rules are silent in relation to any particular practise or procedure, the proceedings of the Board shall be conducted in accordance with such rules of practice and procedures as the Board may specify as provided by rule 17(3) of the Board rules and in accordance with Section 17 (1) (a-e) of Tax Revenue Appeal Act, Cap 408 [2021].
Nevertheless, the said rules of procedures are not in place. Moreover, the Board rules, exclude the applicability of the rules of procedure made under the Civil Procedure Code, Cap 33 and the Arbitration Act, Cap 15 which could provide tax dispute resolution approaches that reconcile the interest of parties as provided by rule 16 (1) of the Board rules.
Therefore, approaches like mediation, conciliation and arbitration lack a legal backup in the Tanzania tax dispute resolution system. However, in what seems to be a paradigm shift by the Sixth phase government, the minister through the FA.2021/2022 amended section 22 of the Tax Revenue Appeals Act, Cap 408 [RE: 2021] by adding subsection (7) which provide an avenue to parties in a tax appeal proceeding at any stage before judgement is delivered to apply for amicable settlement of tax dispute through mediation.
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