Let’s fine tune the six-month tax determination rule!

“Timeliness is next to godliness” is a saying that conveys the importance of keeping time.  For taxpayers the issue of timeliness is important not just in relation to deadlines imposed on them as taxpayers but also in terms of TRA finalising assessments for old years.  A very positive development three years ago was a Finance Act 2020 amendment to the Tax Administration Act 2015 (TAA 2015) to require the Tanzania Revenue Authority (TRA) to determine an objection to a tax decision/assessment within six months from the date of admission of the objection. 

The intention of the amendment, as outlined in the object and reasons in the Finance Bill 2020, was “to ensure that there is efficient and effective procedure in the determination of tax objections”.  So are the intended objects and reasons being met?   Well, certainly this change has encouraged the TRA to be more timely in the resolution of objections, and so has had a positive impact.

But, nevertheless significant reservations remain.  In particular, if the TRA fails to meet this deadline, the original tax decision/assessment is considered final or confirmed, and so the only recourse left to the objector is to file a tax appeal to the Tax Revenue Appeals Board (TRAB).  My first reservation is that the provisions appear to assume that it is more likely than not that proposed adjustments by TRA are justified (i.e. benefit of doubt to the TRA not the taxpayer) by deeming the determination of an objection in line with TRA’s assessment on expiration of the six month timeline.  Secondly, a deemed determination on the basis of the original TRA decision in effect can penalise the taxpayer for delays caused by TRA and reduce the incentive for timely determination by TRA. 

By way of contrast a similar time limit applied in the past (under the Tax Revenue Appeals Act (“TRAA”) 2000 but prior to amendments by the Finance Act, 2004), but in this case the deemed assessment was according to the notice of objection (if no response from TRA within the six month time limit). Similarly, provisions currently in force under Zanzibar’s tax administration legislation deem an assessment to be determined in line with the taxpayer’s objection where the revenue authority fails to determine an objection within ninety days. Again, Kenya and Uganda also deem determination in favour of the taxpayer where the tax authority fails to determine an objection within stipulated timelines. As such, the position in Mainland Tanzania does appear to deviate from the norm and to the disadvantage of the taxpayer.

In addition, the provisions make it more difficult for a taxpayer to monitor the deadline for filing an appeal. The lack of definition of ‘the date of admission’ in the TAA 2015 creates ambiguity as to when an objection is considered as admitted and consequently when the clock starts counting.  This ambiguity arises as in some cases there is no admission letter issued by the TRA notwithstanding that the taxpayer has filed an objection which  complies with all the requirements provided under the law. The Finance Bill 2023 had proposed a solution by way of a fourteen day timeline for the TRA  to communicate the objection’s admissibility or refusal, but this  proposal did not make it to the Finance Act 2023. As such, the date of admission remains a challenge where there is no admission letter from the TRA. 

Where there is no admission letter, then in practice, the “safety first” approach taken by most taxpayers is to consider the date the objection was filed as the date of admission of the objection (the same as the approach proposed in the Finance Bill 2023). However, others will take a different position asserting that countdown can only commence upon receipt of an admission letter from TRA. Notably, there are instances where TRA has raised a preliminary objection to appeals filed with the TRAB, arguing that the appeals were premature, contending that the taxpayer should initiate the count not from the objection filing date but from the yet-to-be-issued admission letter's receipt date. Another challenge is that in most cases, the TRAB refuses to entertain appeals arising from the six month rule as it views them as being filed prematurely, insisting  that the TRA should determine the objection before an appeal is lodged. 

So, what to do?  Well, firstly I would suggest that the six month provision in the TAA 2015 is amended such that the assessment is deemed to be amended in accordance with the notice of objection (and not in accordance with the original assessment) if no response is provided by TRA within a period of six months (in other words, similar to the position that once applied under TRAA 2000, and that applies in Zanzibar, Kenya and Uganda). 

I would also propose that the TAA 2015 is amended to include a provision on admission of objection, similar to the Finance Bill 2023 proposal, to make it mandatory for TRA to issue a letter to admit objections once all conditions for admittance are met. 

Such changes would further assist towards timely but fair resolution of tax disputes.