A golden chance to set things right for taxpayers

The Minister for Finance and Planning, Dr Philip Mpango, tabled the National Budget for 2018/19 in the National Assembly in Dodoma which proposed numerous tax reforms and revenue measures.

I had an opportunity of listening his speech from beginning to the end. Among new revenue measures for the coming fiscal year according to the minister’s speech is the amendment of the Tax Administration Act, CAP 438 which is the procedural law governing the administration of taxes in Tanzania.

Item 50 (out of 83) of the minister’s speech proposes to make an amendment in the above Act in order to introduce Tax Amnesty of 100 per cent on interest and penalties. The said tax amnesty will exist for six months starting from July 1, 2018 up to December 31, 2018.

It is expected that this measure will improve tax compliance by 10 per cent and enable the Government to collect the outstanding principal amount.

As it is known to many, tax amnesty refers to a limited time opportunity given to taxpayers to pay a defined amount, in exchange for “forgiveness” of a tax liability (including interest and penalties) relating to a previous tax period or periods. In practice, “mercy” will extend to cover any interest or penalty whatsoever charged not limited to the outstanding tax disputes, late or unsubmitted tax returns and unfulfilled registrations.

To the business community, this is one of the remarkable and long awaited measures from the government that is expected to be cheered loudly.

Having observed the impact of introducing a similar measure by the tax authorities in Kenya and Uganda, it is expected that the measure will attain greatest outcomes for the tax man and tax payers alike.

In the 2007/08 budget, Uganda introduced a similar tax amnesty and one of the achievements of the scheme was a collection of over Ush3 billion within a period of six months from about 400 taxpayers (source: Uganda Revenue Authority publication).

Likewise, in 2016 Kenya introduced tax amnesty on foreign income with respect to any year of income ending on or before December 31, 2016. One notable outcome in Kenya is the increased voluntary declaration of foreign income, which was previously undisclosed for tax purpose.

Always, tax amnesty provides a distinctive opportunity to axpayers to clean up their past tax records, clear whatever tax liability pending (if any) and at the same time make good on any non-compliance free from penalty and interest.

Moreover, tax amnesty encourages new or unregistered businesses to abide by the registration requirements not limited to the Tax Identification Number (TIN) and value added tax (VAT) Registrations.

As highlighted in the minister’s speech, we anticipate that the Finance Bill 2018 will contain distinctive guidance, coverage and documentation requirements for the proposed tax amnesty.

Nevertheless, this is one of the pronounced and commendable revenue measure in 2018/19 Budget.