Oliver Twist and Tax Administration

“May I have some more?” is Oliver’s request in Dickens’ famous novel “Oliver Twist”, following which the master in charge of serving the food hits Oliver on the head with a ladle.

This same question has been increasingly asked by taxpayers following the Finance Act 2020 amendments to the Tax Administration Act (“TAA”) 2015 to introduce new time limits for taxpayers to provide information to the Tanzania Revenue Authority (“TRA”).  For example, when the TRA serves the taxpayer with a notice to obtain information then such information should be provided within 14 days. Given the nature of information usually requested and number of years covered, a considerable amount of time is normally required by a taxpayer to fully address TRA’s queries and provide all the requested information. Therefore, the 14 days limit is normally not sufficient with the result that taxpayers then have to ask “Can I have more time, please?” Ideally, this time limit would be amended to 30 days to provide sufficient time.

A similar challenge arises with the time limit to respond to a TRA request for further information to assist in determination of an objection.  In this case, the taxpayer is required to provide information within the time limit stipulated in the TRA’s notice but not exceeding thirty days from the date of service of the notice - however, this limit may be extended for additional 7 days upon receipt of sufficient reason adduced by the objector (taxpayer). Again, why not have an automatic 30 days time period with the possibility of an additional 15 days to be granted if extension is requested on time. This will ensure that the factual issues are resolved in early stages of the dispute resolution process rather than progressing to later stages with the consequent additional expense in terms of time and resources of both TRA and taxpayers.

The “ladle on the head” comes in relation to a request for an extension in the timeline to file an objection to an assessment.  As now drafted the law provides a 30 day time limit subject to an extension of time if a request is made within 7 days before the expiry of the deadline. If for any reason whatsoever this deadline is missed, it appears there is no avenue to obtain a late admission of the objection. By contrast, prior to the entry into force of the TAA 2015 there was a consistent history of the legislation (Income Tax Act 1973 and the Tax Revenue Appeals Act 2000) recognising that there may be circumstances such as absence from the United Republic, sickness or other reasonable cause to justify the grant of an extension of time to file an objection.

In the interest of justice, it is of fundamental importance that the law is amended so as to permit a taxpayer to file a late objection where reasonable grounds have been provided. In addition, the application should not be subject to a deadline that predates the objection deadline as de facto there may be scenarios where such timing is not possible. This would align with the position that historically prevailed in Tanzania and indeed continues to prevail in Kenya and Uganda.

Given the significance of the objection process, there is also the question as to whether a time limit of more than 30 days may be appropriate.  I acknowledge that historically this has been the time limit and a similar deadline also applies in Kenya.  However, there is much to commend the approach of Uganda in providing for 45 days. In particular, if you consider that once weekends are excluded then 30 days in fact becomes a maximum of 22 working days, and frequently much less due to public holidays - for example this year, the periods 2 April 2021 to 26 April 2021 and 26 April 2021 to 14 May had four public holidays falling on working days. So in practice it is quite possible that the 30 days in fact means 18 working days - a very short time period to respond to assessment, particularly if it requires significant details in terms of supporting documentation and reconciliations. So we could consider an amended time frame to file an objection of 45 days instead of the current 30 days.

One other change introduced by the Finance Act 2020 was the deemed determination of an objection if no determination has been issued within six months of an objection. The challenge however is that the determination is then deemed not in accordance with the objecting, but rather with the underlying tax assessment or decision. In practice the six month limit has been positive in encouraging TRA to promptly finalise objections. Nevertheless, the approach taken in relation to deeming (on the basis of the original assessment) is a matter for concern as potentially it could create a disincentive for TRA to determine objections and de facto pass on more work to the appellate bodies. It also creates difficulties for taxpayers to monitor the deadline for filing an appeal unless some formal notification mechanism from TRA is instituted. By way of contrast when a similar time limit applied in the past under the Tax Revenue Appeals Act (TRAA)  2000, it deemed an assessment to be amended in accordance with the notice of objection if no response from TRA within the six months time limit. This would seem a much more equitable approach.

Tax administration changes to help taxpayers - in particular, more reasonable time frames for taxpayers to respond - could be an easy win for the Minister for Finance in the upcoming Budget. Such changes could also help TRA in reducing the number of times they have to spend responding to the question “Can I have some more (time)?”

By Jeffson Ndossa is a senior associate, Tax services at PwC Tanzania.