The Ombudsman

The Ombudsman: The answer taxpayers have been waiting for?

In the budget reading last week, the Minister for Finance and Planning Hon. Dr. Philip Mpango discussed the introduction of the “Office of Tax Ombudsman”.This will be an independent body responsible for receiving correct and unbiased information and complaints mainly from taxpayers in relation to the administration of tax affairs by Tanzania Revenue Authority (TRA). The major functions of the office will include receiving and working on complaints of corruption, arbitrary assessments, unlawful closure of businesses and similar complaints. Taxpayers will most likely be interested on the extent of duties of the Ombudsman and his/her powers thereof.

The Taxpayer’s Service Charter of July 2017 gives taxpayers, among other things, a right to impartial application of the tax laws when fulfilling tax obligations and the right to object to an assessment or any other decision made by TRA. However, until now there was no mechanism of holding the TRA to the commitments set out in this charter. Through his powers, the Ombudsman will now be expected to stand for these rights. Indeed, taxpayers may also perhaps be able to involve the Ombudsman where unnecessary delays are being experienced in administrative matters; in particular, while taxpayers have hard deadlines set for them, there are limited commitments in terms of deadlines for TRA.

Very close to home, the Office of the Tax Ombudsman was set up in Kenya in 2011. In the year 2016/2017, the Ombudsman handled a total of 92,994 cases out of which 77,536 were resolved. Similarly, South Africa has the office of The Tax Ombud which is independent of the Revenue Authority and provides taxpayers with a fair and simple way to seek a resolution for a service, procedure or administrative dispute that they have already unsuccessfully tried to resolve through the South African Revenue Service (SARS). In the United Kingdom they have Ombudsman who are independent, impartial and provide a free service. They investigate complaints that haven't been solved by the organisation complained against such as HM Revenue and Customs (HMRC). They also investigate complaints when something has been handled badly or unfairly, making someone suffer as a result. This is sometimes called maladministration.

In terms of scope of responsibilities, the question might be asked as to whether in addition to resolving tax administrative issues, the Ombudsman’s responsibilities might be expanded to also serve as an Alternative Dispute Resolution (ADR) mechanism.

Currently where the TRA and taxpayer fail to reach an amicable position for the determination of the objection, then the only avenue for the taxpayer to appeal is by way of an appeal firstly to the Tax Revenue Appeals Board (TRAB), then the Tax Revenue Appeals Tribunal (TRAT) and lastly the Court of Appeal (CAT). In practice this process can take anywhere from five to ten years. This places a severe administrative burden on both the taxman and the taxpayer.

This begs the question, can the Tax Ombudsman step in to fill the gap in the system and fasten the dispute resolution process? In addition to overseeing the tax administration process, the Ombudsman can also serve as an ADR body. This is a process by which taxpayers seek to have an independent review of a tax assessment, resulting from a tax audit, outside the environment giving rise to the dispute. The process safeguards taxpayers’ rights to challenge a tax assessment and get a fair hearing. It provides an environment where tax disputes are amicably resolved without recourse to lengthy and costly litigation. The process is confidential, without prejudice, voluntary and non-adversarial.

The advantage of setting up an ADR mechanism through the office of the Tax Ombudsman might be a significant reduction of the amount of time and money spent on the tax dispute resolution in Tanzania. This process ensures that an independent third party mediates and arbitrates in order to reach an amicable solution for both the taxman and the taxpayer. In this case the duties of the Ombudsman will need to be expanded to cater for ADR - something which would enhance the taxpayer’s right of impartial treatment. However, with the extent of powers and functions that the Tax Ombudsman may have, will he/ she remain independent and impartial in all instances?

Currently the Office of the Tax Ombudsman is planned to be under the Ministry of Finance and Planning. A question that needs to be answered is whether the Ombudsman will be able to make unbiased decisions without any influence. This is very important as independence and fairness is the core of the office, failure of which will defeat its purpose.

By Annasia Tarimo and Vivian Mbowe, both Senior Associates - Tax Services

The views expressed do not necessarily represent those of PwC. For PwC updates on tax and other matters do follow @pwc_tz or visit our website www.pwc.com/tz

Article first published in The Citizen (24.06.2019).