When the starter fires the gun in a 100-metre sprint, runners explode off their marks. For them, each second stretches into eternity. But the race is over in a flash. Some bask in victory, while others feel disappointment. In a similar way, when a taxpayer opts for an out-of-court settlement of a tax dispute, they enter a race against time. The time to negotiate and settle is short. It requires quick, strategic action.
Tax dispute resolution in Tanzania begins with the Tanzania Revenue Authority (TRA) through the objection process. If a taxpayer is still aggrieved after the objection is determined, they may escalate the dispute to the Tax Revenue Appeals Board (TRAB), the Tax Revenue Appeals Tribunal (TRAT), and, if necessary, the Court of Appeal (CoA). Although the process is thorough, it takes a long time.
Recognising this challenge, the Finance Act 2021 introduced an alternative path - mediation. This allowed taxpayers to request an out-of-court settlement at the TRAB and TRAT levels by reengaging directly with the TRA. If successful, a deed of settlement would formalise the agreement which would be a legally binding judgement. This change was welcomed by many as it promised quicker resolutions and saved resources for taxpayers and the revenue authority.
However, this mediation process had a significant flaw - there was no set timeline. Settlement talks could drag on for years. This undermined the efficiency that made this option appealing. Mediation was meant to be a quick alternative to litigation. But endless negotiations left many cases in limbo. This frustrated the taxpayers, the tax authorities as well as the appellant bodies.
To address this issue, the Finance Act 2024 introduced a strict timeline. Taxpayers now have 60 days to settle. They can get a 10-day extension if the relevant appellate body approves it. If the settlement is not finalised in this time, the case goes back to the appellate body for judgement.
Taxpayers have at most 70 days to engage with the TRA. In this time, they must negotiate terms and sign a settlement agreement. This timeline, while providing much-needed structure, also presents practical challenges.
Upon lodging a request for settlement, a taxpayer is like a sprinter at the starting blocks—every second counts. The process requires active, bipartisan engagement from both the taxpayer and the revenue authority. Any delay, from bureaucratic hurdles or slow negotiations, could mean losing the chance to settle and being forced back into a lengthy litigation process.
The intention behind the 60-day cap is commendable. It prevents cases from stagnating under the guise of “ongoing settlement discussions” but it also places significant pressure on taxpayers. Tax disputes are complex, ensuring that mediation concludes successfully within such a short time frame is no easy feat.
To navigate this time limit, taxpayers should prepare before requesting mediation. Engage the TRA early. A clear settlement strategy is key. It defines a "win-win" resolution for both parties. This ensures that formal negotiations are more efficient. Also, delays often arise from missing financial records, agreements, or evidence. Having all required documents ready can prevent setbacks. By taking these steps, taxpayers can improve their chances of reaching an agreement within the tight deadline.
A strict short deadline for out-of-court settlements has turned tax mediation into a high-stakes sprint. The days of endless negotiations are over. Taxpayers must now act swiftly to reach an agreement before time runs out.
The benefits are clear for those prepared to meet the challenge. Faster resolution, reduced litigation costs and greater certainty. Like in a 100-metre sprint, success hinges on preparation, agility, and making every second count.
Fredrickson Maboko is a Senior Associate, Tax Services at PwC Tanzania. The views expressed do not necessarily represent those of PwC.
