All over the world, tax authorities do not have it within their “DNA” to offer concessions easily. This is why a measure such as a tax amnesty gets a lot of attention. Amnesties simply do not come very often. When Dr. Philip Mpango announced the Government’s intention to have one in the current financial year, many commentators applauded the move. It was a step in the right direction, a step that will not only help the government collect revenues, but also foster future compliance.
There were concerns however, on the length of the window provided (six months to the end of the current calendar year). This was particularly against the background of the lack of formal guidance accompanying the Finance Act on the taxes and taxpayers that will qualify for the amnesty program. Many requested that the regulations be produced as quickly as possible to allow sufficient time for taxpayers to lodge their applications.
The government has acted swiftly in providing this guidance; in particular, within two weeks after the passing of the Finance Act, the Tax Administration (Remission of Interest and Penalty) Order, 2018 was published - a clear indication of the seriousness with which the Government approaches this program, which presents a fantastic opportunity for taxpayers in Tanzania.
To summarise the Order, taxpayers with unpaid interest and penalties on tax liabilities relating to previous years will have the opportunity to have the interest and penalties fully remitted.
This remission broadly applies to all TRA administered taxes but excludes custom duties. A taxpayer will be required to fill a form, declare his tax liabilities, agree to pay the principal tax and obtain an amnesty on the interest and penalties once he has signed a settlement agreement with TRA.
For unregistered taxpayers (those that did not file their returns and / or not registered for TIN or VAT) this is an opportunity to declare principal liabilities and get a remission of interest and penalties, and in one swoop get their tax affairs in order. For registered taxpayers, the scope extends not just to undisclosed liabilities, but also matters that are already under discussion but in dispute; in particular, there is room for taxpayers who have objected or appealed to an assessment to get the amnesty, provided they concede to the principal liability.
You may say that this is all well and good, but even the principal tax on its own may not be manageable from a cash flow perspective - especially in the current tough financial times. Well, the good news here is that that the Order does allow a taxpayer to make the principal tax payments in instalments as part of an agreed payment plan over the course of the financial year (but with full settlement no later than the financial year end, namely 30 June 2019).
So what do you do about this opportunity? Well, you ought to remember that there is not much time. Amnesties are, by definition, short lived. Ours will effectively last for less than six months because an application form has to be lodged before 30 November 2018. My advice would therefore be to look at your affairs right away and assess if this amnesty programme may be an opportunity for you. Even if you think your tax matters are crystal clean, you might wish to consider getting your tax consultant to do a “tax health check” just to make sure that nothing has been overlooked.
Remember, the tax authority may make an assessment based on the information provided in the amnesty application. You therefore want to be sure that your declaration and the resultant principal tax you agree to is accurate.
A key condition for the tax amnesty is for a taxpayer to concede the principal tax and consent not to contest an assessment in court. In other words, as much as this is an opportunity, it will require a judgement call, on the taxpayer who contests the assessed principal liability, on the relative merits of continuing with the court dispute resolution process against potentially conceding to the principal liabilities and resolving the dispute through the amnesty programme.
On the whole, it is a great opportunity, taxpayers would be wise to make the most out of it. But, with a 30 November deadline for applications, if any action is to be taken, it needs to be taken promptly!
Mr Ndandala is a manager for Tax Services at PwC. 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