Tax disputes: let’s resolve the deemed assessment conundrum!

What you need to know:

So in the context of Tanzania, how does a tax dispute arise and how is it resolved? Similar to the process in many other jurisdictions, the initial step is for the Revenue Authority (in this case the Tanzania Revenue Authority (TRA) to conduct an audit on the compliance status of the taxpayer

Following these discussions the TRA may conclude that in their view there are some adjustments to make whether to the reported income or additional tax to assess, in which case they issue an assessment for which the taxpayer has 30 days to file a formal objection (if he is not satisfied with the basis of the assessment). At the objection stage, the taxpayer is required to pay a tax deposit equal to the higher of either one third of the assessed tax or tax not in dispute. In some instances, the taxpayer may request for waiver of the required tax deposit by providing reasons and evidence to support the grant of such a waiver. After fulfilling the conditions for lodging the objection, the TRA will then review the objection to the assessment and issue a proposal to settle the objection - again, the taxpayer has 30 days to respond to this proposal (to either accept or provide additional arguments to dispute the proposal).

The deemed assessment in line with the original TRA assessment does give rise to a number of concerns. Firstly, it appears to assume that it is more likely than not that proposed adjustments are justified (i.e. benefit of doubt to the TRA not the taxpayer), and also does not take account that there may be matters that TRA have already in principle conceded following receipt of the objection. It also will result in more work for the appellate bodies as following the deemed determination the only mechanism for a taxpayer to continue the dispute is to appeal to the Tax Revenue Appeals Board (“TRAB”). It also creates practical difficulties for taxpayers to monitor the deadline for filing an appeal as there is no formal notification mechanism from TRA as to the lapse of the pending deadline.

In the case of Tanzania, the 2020 amendment has also helped to ensure timely action by the TRA in resolving objections. However, the concern remains that in certain cases some assessments are not determined in time - and in such a case the consequence can be inequitable for the taxpayer. So as to resolve this my proposal is for an amendment to the TAA so that where there is a deemed determination (if no response is provided by TRA within a period of six months from the date of the objection) then the assessment is deemed to be amended in accordance with the notice of objection (in other words, similar to the position that applied from 2000 to 2004, and aligned with the process I experienced in Kenya). If it is felt that the six month period is not enough time for the TRA to make an objection decision then perhaps the time frame could be changed to 12 months. In addition, so as to remove any doubt as to when the six month (or 12 month) period commences, it would be helpful to require TRA to issue a letter to admit any objection (once the relevant conditions for admittance are met).

Tax disputes: let’s resolve the deemed assessment conundrum!

What you need to know:

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