Legal Framework for Tax Administration and Tax Dispute Resolution in Tanzania.

1. The Constitution of the United Republic of Tanzania

The constitution is a mother law whereby all other legislations must conform to it, any law which goes against articles of constitution is null and void. The Constitution of Tanzania guarantees several rights such as right to information, right to fair hearing and equality before the law, right to own and to enjoy possession of properties without interference and right to seek justice before judiciary of Tanzania. Taxpayers are citizens of Tanzania hence they are entitled enjoyment of all these rights and privileges. The Constitution of Tanzania do not provide on administration of tax and disputes resolution mechanism but it provides for basic principle or condition for taxation of citizens. Article 138(1) of the constitution provides that; -

“No tax of any kind shall be imposed save in accordance with a law enacted by Parliament or pursuant to a procedure lawfully prescribed and having the force of law by virtue of a law enacted by Parliament.”

This provision establishes a basic taxation principle that, no taxes may be imposed to citizens without being specified or recognized by a legislation. The taxing authority has no mandate to impose tax to a taxpayer on their own wishes, there must be a legislation which is authorizing collection of taxes. Constitution establishes a basic taxation principle where by government is limited to impose taxes randomly without being passed by a parliament and being contained in a legislation.

2. The Income Tax Act

The Income Tax Act[2] is an important legislation which specify which taxes are to be paid by whom at what time. This Act provides on income taxes which are chargeable basing on profit earned by a sole business person or business entity such as corporate. Section 4 of the Act provides on bases of charging tax. As per section 4, all incomes are liable for income tax which is payable for each year of income by a person who has a total income for the year of income or a corporation earned profit per year. This legislation informs that, all incomes from employment, business or investment are liable for tax and amount of tax may differ from one individual to another or from one corporate to another in case of corporate tax as provide under section 6(1) of the Act. This legislation provides powers to a responsible minister to exempt some forms of income from tax liability. Likewise, the Act provides on tax deductions as per section 11(1) of Act, deductions from charity and religious institution. This Act do not provide on tax disputes resolution processes and procedures by plays a great role by informing which income are taxable and how taxing authority may collect tax basing on principles established under this Act.

3. Tanzania Revenue Authority Act

Tanzania Revenue Authority Act[3] is a vital taxing legislation because it establish a taxing authority under section 4(1) of the Act. The established authority is called Tanzania Revenue Authority (TRA) which consist of board and other operating departments. The authority is a corporate body with perpetual succession and a common seal and being capable to sue or being sued by its corporate name, the authority may borrow money, acquire and dispose property and all other legal actions that a corporate may do. TRA is given several official powers as indicated under section 5 of the Act, among powers granted to TRA are; to administer and give effect to the tax laws on assessment, collection and account for all revenue to which those laws apply; to monitor, oversee, coordinate activities and ensure the fair, efficient and effective administration of revenue laws by revenue departments in the jurisdiction of the union government; to monitor and ensure the collection of fees, levies, charges or any other tax collected by any Ministry, Department or Division of the Government as revenue for the Government; to advise the Minister and other relevant organs on all matters pertaining to fiscal policy, the implementation of the policy and the constant improvement of policy regarding revenue laws and administration; to promote voluntary tax compliance to the highest degree possible; to take such measures as may be necessary to improve the standard of service given to taxpayers, with a view to improving the effectiveness of the revenue departments and maximizing revenue collection; and to determine the steps to be taken to counteract fraud and other forms of tax and other fiscal evasions.

Tanzania Revenue Authority Act[4] under section 10 establishes the board which is a governing authority of the authority which is under control of the chairman appointed by president. The main function of the board is to formulate and implement policies of the authority. The board is given powers to direct commissioner general to furnish any information needed by the board and may give lawful orders to commissioner general in connection with the management, performance and operational policies. Again, TRAA establishes the office of commissioner general of TRA under section 16(1) of the Act whereby a commissioner is an appointee of the president who is a chief executive officer of the authority responsible to day-to-day activities of the authority. TRAA is silent on tax disputes resolution mechanism.

4. The Tax Administration Act

The Tax Administration Act[5] is among key tax legislations which was enacted in 2015 and revised in 2019 to include all previous amendments which were not yet incorporated in a legislation rather than being known in Miscellaneous Amendments.  Before enactment of TAA, tax collection and administration of tax processes and procedures were not uniform as there were several laws which provided different modes of handling tax issues. The enactment of TAA was a cure to random processes of tax administration whereby the legislation introduced new uniform procedures of administering tax issues to all taxpayers. Section 15 of Tax Administration Act

[6] impose authority to Tanzania Revenue Authority to administer all tax laws as provided under Tanzania Revenue Authority Act[7]. TRA is a one and only entity which is given powers to enforce tax laws, and to handle all tax related issues include tax disputes settlement.

Section 50(1) of the Act gives official mandate to Commissioner General to make any tax decisions he think fit include tax assessment. Likewise, Section 50(3)(a) of Tax Administration Act allows self-assessment by taxpayers whereby a taxpayer may conduct self-assessment and file annual return which indicate tax figures to be paid. It happens sometimes when a commissioner general rejects an amount indicated in self-assessment papers by a taxpayer due to any reason he thinks fit or he may issue an assessment note indicating tax amount to be paid by a taxpayer, which a taxpayer does not agree. In this situation when there is a disagreement between taxpayer and a commissioner, the Tax Administration Act provides for a resolution mechanism under section 51-53 of the Act. Section 51(1) of the Tax Administration Act provides an avenue to a person aggrieved by a tax decision made by a commissioner general to object the given decision by filing objection to commissioner general within thirty days from the date of service of the tax decision. Tax objection must be accompanied with proof of payment of undisputed tax or 1/3 of the assessed tax whichever amount is greater.

As per section 52(1) of the Tax Administration Act, upon admission of an object, Commissioner General may make decision to amend his assessments or he may uphold his previous decision. At this time, a commissioner may call any information from a taxpayer and a taxpayer will be liable to furnish that information to commissioner for the purpose of the dispute. If a commissioner finds that his tax assessments were wrong, he may amend and issue final assessment note to a tax payer or he may make any decision fit which a taxpayer will act upon. In case of refusal of tax objection by a commissioner, a taxpayer in a period of thirty days is required to make submission before a commissioner if he agrees or disagree with amendment of tax assessment or refusal of tax objection where a commissioner will issue a final determination.

 As per section 53(1) of Tax administration Act, if a taxpayer is aggrieved by the decisions of tax objections or other decision or omission of the Commissioner General, he may appeal to the Tax Revenue Appeals Board as provided under Tax Revenue Appeals Act [8].

5. The Tax Revenue Appeals Act

Section 4(1) of the Tax Revenue Appeals Act[9] establishes the Tax Revenue Appeals Board (TRAB) while section 8(1) establishes the Tax Revenue Appeals Tribunal (TRAT). The Act provides for the structure or composition of TRAB and TRAT as per section 4(2) and 8(2) of the Act. Section 7 provides on jurisdiction of TRAB while section 7A together with section 16 provides on rights of appeal against the decisions of the Commissioner. Section 11(1) and (2) provides on jurisdiction of TRAT. TRAB and TRAT proceedings are considered to be of judicial nature conducted in public unless a party to the proceedings applies otherwise. The law provides more about handling witnesses and payment of allowances and expenses to witnesses who attend sessions. The present tax dispute resolution system in Tanzania is a creature of the Tax Revenue Appeals Act which unified tax dispute resolution machineries fragmented under different pieces of tax legislation.

As per section 4(2), the TRAB is made up of a team of the following people; chairman who is an appointee of the responsible minister; three vice chairmen wo are appointee of the minister, one of them must be from Zanzibar; and twelve other members who are appointed by the minister form different regions of Tanzania. TRAB is given under section 7 and 7A, both original and appellate jurisdiction to hear fresh tax suits admitted to it by TRA, or to hear appeals arising from tax objection decisions from commissioner of TRA.

6. The Appellate Jurisdiction Act

This Act enacted to govern how appeals may be lodged before the court of appeal of Tanzania. Section 4(1) of the Act[10] provides that, the court of appeal will have jurisdiction to hear appeals from High Court and subordinate courts with extended jurisdiction. TRAB and TRAT are considered under law as subordinate courts which operates out judicial hierarchy special for tax matters. Also, section 5 of the Act provides jurisdiction to CAT to hear civil appeals include tax disputes appeals. This Act is useful because it provides appeal avenue for persons aggrieved by decisions of TRAB and TRAT hence constitute an important legislation which is complimenting tax disputes machinery.

3.1.7 Rules and Regulations

Rules such as The Tax Revenue Appeals Board Rules[11], The Tax Revenue Appeals Tribunal Rules[12], The Tanzania Court of Appeal Rules[13] provides generally the modes and procedures of lodging appeals to TRAB, TRAT and CAT. Regulations such as Tax Administration (General) Regulations[14] provides much on how TRA can administer tax legislations.

[1] The Constitution of Tanzania

[2] The Income Tax Act. Cap 332 [R.E. 2019] S.

[3] Tanzania Revenue Authority Act. Cap 399 [R.E. 2019] S.

[4] ibid

[5] The Tax Administration Act [CAP. 438 R.E 2019]

[6]ibid

[7]ibid

[8] ibid

[9] ibid

[10] The Appellate Jurisdiction Act Cap 141 R.E 2009

[11] Rule 29 of the Tax Revenue Appeals Board Rules G.N No. 217, 2018.

[12] The Tax Revenue Appeals Tribunal Rules G.N. No. 6 of 2001.

[13] The Tax Revenue Appeals Tribunal Rules G.N. No. 6 of 2001.

[14] Tax Administration (General) Regulations G.N. No 101, 2016.