In my opinion he must be charged with penalty and interest for late payment from the date when the transaction (sale transaction) took place.
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Quality Group loses appeal against TRA-imposed tax
THISDAY REPORTER
Dar es Salaam
QUALITY Group Limited has lost an appeal against a 1.3bn/- tax arrears bill charged by the Tanzania Revenue Authority (TRA), based on the companys sale of its Ubungo godowns in Dar es Salaam to the National Social Security Fund (NSSF) for a staggering 47.5bn/-, it has been confirmed.
According to sources within the National Tax Revenue Appeals Board, the company � which was disputing the TRAs capital gains assessment figures - will now have to pay the assessed amount in full.
Contacted for comment, board secretary Respicius Mwijage declined to give details of the boards March 23 ruling, apart from confirming that it was basically in TRA�s favour.
He said a copy of the case proceedings and final ruling would only be available after the Easter holidays.
According to our sources, the board ruled that TRA had jumped the gun in collecting, by dint of a distress warrant, 500m/- from a local bank account belonging to Quality Group, saying it was too early for TRA to collect that money.
Following the TRAs action of taking the 500m/- as an advance payment of sorts on the total 1.3bn/- arrears debt, Quality Group went ahead and lodged its appeal with the National Tax Revenue Appeals Board.
Now after this ruling, Quality Group will have to pay the difference, which amounts to 800m/-. All TRA has to do is reconcile the transactions, a government tax expert told THISDAY.
Quality Group, which is owned by prominent local businessman Yusuf Manji, was said to have tried to dodge paying capital gains tax by failing to disclose to TRA the sale of its Ubungo godowns to NSSF.
According to well-placed government sources, even after NSSF made final payment to Quality Group for the Hifadhi EPZ warehouses at Ubungo in the city, the company appeared to intentionally dilly-dally in informing TRA about the sale as required by law.
Regulations required the privately-owned company as seller to inform TRA as quickly as possible about such a transaction for tax purposes.
Quality Groups tax obligations in the deal are understood to have consisted mainly of capital gains tax, being 10 per cent of the selling price minus adjusted costs such as depreciation and other costs.
However, according to our sources, TRA came to learn about the transaction by itself quite a while after the final payment was made to Quality Group by NSSF.
That was when TRA officials started following up the matter to try and establish if the relevant taxes were paid. It was later revealed that Quality Group had not informed TRA of the sale as required by law, and had thus dodged to pay taxes, said a government official familiar with the transaction.
The sources said the Quality Group CEO, Manji, refused to disclose details of the transaction even after officials from TRAs domestic revenue department contacted him directly about the deal.
It was only after an independent assessment of the revenue implications tied in with the transaction, that the TRA officials are said to have discovered that the company had dodged taxes amounting to a total of 1.3bn/-.
According to the government official, the initial 10 per cent capital gains tax estimate on the transaction amounted to 4.75bn/-, but the figure was lowered to 1.3bn/- after adjusting for depreciation and other costs.
When Manji was initially confronted by TRA officials over payment of the due taxes, he did not cooperate and even refused to pay. He only obliged after being served with a distress warrant sometime last year, explained another source.
The TRA serves a distress warrant to taxpayers who resist to pay their due taxes after the commissioner-general has confirmed the revenue assessment.
If a taxpayer fails to pay within 10 days of being served with the warrant, the TRA has the right to seize any property belonging to the defaulting taxpayer after appointing a broker, so as to recover the money.
In this case, the source said that Manji sensed danger and eventually complied before the expiry of the ultimatum, submitting his companys records to TRA and initially paying 500m/- of the 1.3bn/- taxes due.
He is then said to have immediately submitted a formal appeal with the National Tax Revenue Appeals Board, disputing the TRA order for him to pay the assessed amount of taxes.
To appeal, a taxpayer must pay at least one-third of the assessed amount he is rejecting as being excessive.