Papaa Mobimba
JF-Expert Member
- Jan 27, 2018
- 746
- 3,058
The following are our opinions on the budget proposals for the Financial Year 2019-2020.
The opinions on this document are ours and we take all responsibilities for it.
The aim of the documents is prepared reflecting the current tax regime with the aim of proposing changes that will increase revenue collection and at the same protecting and enhancing the growth of our economy.
We; Panafrican Auditors; being good citizens have the responsibility of being part of the economy
1, Introduction of the Tax Ombudsman
The Government is proposing for the introduction of the Tax Ombudsman
Problems:
We are of the opinion that the Introduction of the Tax Ombudsman might bring contradiction as
there are existing laws and systems dealing with similar responsibilities as those of the proposed
Tax Ombudsman.
They include:
i) The PCCB Act
ii) The Tax Appeals Act
The Government is proposing for the introduction of the Tax Ombudsman
The budget speech is hereby reproduced:
‘Honourable Speaker, the Government will undertake various policy and administrative
measures so as to strengthen and simplify revenue collection. The measures among others
include:- (i) Establishing an independent “Office of Tax Ombudsman” which will be
responsible for receiving correct and unbiased information and complaints from taxpayers or
other people with good intention against administration of tax affairs by Tanzania Revenue
Authority. The office of the Ombudsman, will be coordinated under the Ministry of Finance
and Planning. The major functions of the office of the Ombudsman will include;
(a) Receiving and working on corruption complaints against TRA officials;
(b) Receiving and working on arbitrary assessments complaints against TRA officials;
(c) Receiving and working on unlawful closure of businesses complaints against TRA officials;
and
(d) Receiving and working on any similar complaints regarding tax administration against
TRA officials.’
The major functions of the proposed independent organ (Tax Ombudsman) are dealt with the above
mentioned acts and there are systems and procedures in place. This could create confusion on who
is to what and what are the limits of each of the apparatus in dealing with similar functions. To be
sincere this could be duplication of efforts.
The functions of the Tax Ombudsman shall be:
(a) Receiving and working on corruption complaints against TRA officials;
All allegations against corruption are stipulated in the anti-corruption Act (PCCB Act)
(b) Receiving and working on arbitrary assessments complaints against TRA officials;
Any tax payer aggrieved by any tax assessments by TRA or TRA officers has got remedies
under the Tax Administration Act, 2015 and the Tax Appeals Act
(c) Receiving and working on unlawful closure of businesses complaints against TRA
officials;
Again this is dealt with Tax Administration Act, 2015 and the Tax Appeals Act
(d) Receiving and working on any similar complaints regarding tax administration against
TRA officials.’
This is also dealt with the Tax Administration Act, 2015 and the Tax Appeals Act
Our opinions on the tax payers remedies in case of complaints against tax assessments or against any tax officer are as follows:
a) To scrap-off the requirements of depositing one-third of the assessed tax or an amount not in dispute; whichever is greater
This requiurement is denying tax payers of their right as it might be difficult for tax payers to raise the deposit . Equally arbitrary assessments done by TRA officers are also counted in calculating the one-third deposit.
The reasons for this is as follows:
i) Upon tax objection or appeal; it is not clear whether TRA assessments are correct or are not correct. And TRA and the aggrieved tax payers are at loggerheads fighting for and against the tax assessments; then why should the tax payer be compelled to deposit onethird of the amount he or she is objecting/appealing against.
Refer section of the Tax Administration Act, 2015 and is hereby reproduced for ease of reference:
ii) Upon receiving the deposit; the Government might uses the funds to defray expenditures approved by the Parliament of the United Republic of Tanzania ; even before the final determination of the object/appeal. However this was when the Tax Revenues were accounted for under IPSAS Cash Basis.
However, of recent the Government decided to prepare the Financial Statements for Tax Revenues (TRA Accounts) on IPSAS full-compliance.
Under IPSAS Accrual basis; the deposit by the tax payer as a pre-condition for tax objection or appeal is treated as restricted cas
Logically; the deposit as a pre-condition for tax objection/appeal is no longer needed. Previously it was aimed at helping the Government cash flows during the tax objection/appeal process as the money could be spent on Government expenditures. Now it is not acceptable under IPSAS Accrual.
iii) Upon final determination of the tax objection or appeal; the deposit is refunded to the tax payer if the ruling is in his/her favour. However there is not time-value of money considered on this deposit and hence no interst is charged by the tax payer. We are proposing at least a nominal interest rate to be applied at least to cater for inflation during the tax objection/appeal process
iv) This should be considered in the contex that the tax payer coud have invetsed the funds in the business and earn profits or has got the funds through debt-instruments for example bank loans that attracts huge interests and penalties.
v) It should be borne in mind that the objection/appeal process is very slow; and as per TRA Quality Assurance requirements; the objection is to be finalized within six months. But in practice it takes ages.
b) To establish tax objection offices at district and regional levels that are independent of tax officers
The objection/appeal process is very difficult for SMEs as it involves a lot of procedures and documentations that are costly to prepare involving tax experts and legal counsels.
This process should be simplified especially for SMEs
Equally the practice now that tax objections are dealt with by the same TRA officers and in most cases in same TRA office premises as those tax officers who did the assessments in the first place. The independence of the tax objection officers seems to be impaired.
c) Remove the requirement to appeal to the TRA Commissioner General as the First Level objection stage.
Currently; the first objection stage is the Commissioner General. Imagine appealing to the nsame Commsiioner General who issued you with the Tax Assessments.
The second level is the Tax Revenue Appeals Board and thord level is the Tax Revenue Appeals Tribunal
Our opinion is to establish offices of the Tax Revenue Appeals Board at Regional Level
Other proposal
i) Remove the requirements for the TRA Commssioner General to register Tax Consultants – Section ____
The registration of the Tax Consultants should not be done by the TRA Commsiioner General as it is now under section ___
Imagine the advocates being registered by judges or defendants.
We are proposing for Tax Consultants to be registered by the Regulator of the Accounting Profession; the National Board of Accountants and Auditors (NBAA)
You cannot be a tax consultant unless you are an acoountant and or an auditors; and you cannot practice accountancy or auditing in Tanzania without being registered by NBAA.
ii) On changes in tax rates
a) The scrapping of VAT on ladies towels and granting a 25% Corporate Tax on Investors on ladies towels manufactures is not logical.
Manufacturing companies have very huge capita outlays and will obviously be absorbing losses in the first two years of operations and hence no corporate tax will be paid.
We are proposing for re-instating the VAT exemption on ladies towels
iii) Taxpayer education scheme
Maintain taxpayer education champion in every TRA office, but ensure that every TRA officer is responsible for educating taxpayers in his/ her area of operation as part of the day to day service provision to taxpayers.
Equally could set-up tax-kiosks as information centres to tax payers.
iv) Reliance on human capital and expertise that is limited across the country in terms of quantity and quality.
The current tax regime is heavily reliant on paper work and its efficiency depends on the quality of service provided by its human resource. Reliance on human expertise attracts bureaucracy; lengthy processes and inefficiency as the human expertise is limited across the country. The current system encourages feedback delays to taxpayers and creates attractive environment to taxation. Policy changes that focus on system automation will help to promote robust tax systems and promote compliance.
v) A less stable and competitive fiscal policy.
To attract massive investment and foreign direct investment a nation needs a stable and predictable fiscal policy that offers a competitive business environment. A policy has to be responsive and flexible to changing economic circumstances at the same time it should be fairly stable and predictable in a way that does not cause panic to tax payers. And as most economies are exposed to global competition; tax rates should be competitive to attract the flow of investments.
vi) Other Fiscal Policy Area Proposed Processes and Systems
1. Registration of Tax payers • Link personal information databases with taxpayer’s databases through single point registration i.e integrate National ID, Voters Registration Registers, BRELA databases with tax systems.
2. Register taxpayers in tax blocks with specific tax rates for each block. For example Tax block 1 may include Motor vehicle drivers “Bodaboda”, Block 2 may include “Machinga” etc
3. Identification of Tax payers • All persons over working age have to identified through an Identification ID and connected to database with all necessary personal data
4. Map tax points for easy administration and compliance purposes such as; mapping parking centres, property locations, large and robust business areas etc
5. Promote tax payers identification and registration at the local authority levels through engaging local government leaders.
6. Automate Tax processes • Promote innovative tax management systems that can be easily accessed through mobile devices with automated assessments. Include the filing of all tax returns automatically for example the Income Tax Return. Authentication of auditors reports could be verified through peripheral access by auditors certifying financial statements.
7. Promote e-tax systems that enable filing returns via online portals connected with auditors and tax consultants for authorizations and approval on the authenticity of data.
8. • Improve the use Fiscal devices (EFDs) by modifying the system not only to register sales records but also record expenses and produce a simplified income statements.
9. • EFDs should contain automated intelligence systems that provide real time interconnected EFD data that can track the flow of transactions among businesses.
10. • The automated Fiscal device should be capable of providing real time data on income statement; cash management; time review and audit; intelligence system.
11. • Promote payment of taxes through all digital forms and provide real time digital acknowledgement feedback through e-mail or sms notifications.
12. Communication and Customer service • Enable real time communication channels between administrators and clients
13. • Provide real time reminders through mails or push SMS when tax liability is due
14. • Publish and disseminate tax calendars 15. • Promote tax awareness through media campaigns and advocacy and outreach campaigns especially to informal sector groups.
16. • Create simple tax forms both in manual and digital forms with simple tax information that can be understandable to all persons. Tax processes should also be simplified to be understandable by all persons.
17. Legal framework • Reduce tax rates and provide exemptions for youth startup businesses to promote self-employability and growth of SMEs.
18. • Reduce tax incidence and burden by merging some taxes to promote single tax filling and simplifying compliance.
19. • Reduce property tax administration costs by merging it to utility taxes. The new rate should be little not to hike production costs. Merging property tax into utility taxes will increase the tax base and reduce collection costs.
20. • Set amicable dispute resolution mechanisms among tax payers and clients for tax disputes before resorting to tribunals by focusing on tax payers’ ability to pay without resorting to business closure or forceful compliance.
21. • Resolve tax objections speedy and timely
22. • Amend the requirement for deposit of 1/3 of tax liability under dispute pending resolution as fully adoption of the IPSAS Accrual basis does not permit TRA to account for the amount as collections. Also the deposit may have severe liquidity implications to the tax payers business and at the same from the legal point of view the deposit acts as being held guilty before adjudication.
23. • Acknowledge tax payers from the informal sector; classify them into blocks and charge low tax rates that would attract voluntary compliance.
24. • Part of collected taxes should be retaken to improve services to the contributing sectors or tax persons/groups to promote a culture of paying taxes.
25. • Establish community policing for reporting tax frauds, emerging businesses in the informal sector or tax avoidance by empowering grass root local authority leaders. For example local leaders can be effective in reporting rental taxes, potential resident tax payers etc.
26. • Turn social groups into semi - formal recognized groups and sustainable income generating units. For example tax exemptions and special exemptions such as subsidizing health pensions for these groups can turn healthy jogging clubs into economic schemes while improving universal health accessibility.
27. • Reduce Value Added Tax (VAT) for competitive sectors to attract investment and improve business competitiveness with other East Community partners. It is proposed to reduce the rate to the lowest competitive rate for products competing for the East African market.
28. Remove VAT on Imported Capital Goods to boost productivity and investment.
29. Change the timing of supply for VAT to be cash-based and not accrual as it affects the cash flows of businesses especially those on credit sales.
30. We are also requesting for the URT to put more efforts on integration of the African economies especially on Continental Customs Management.
By Rahim Mzee Kachwamba
Partner
Panafrican Auditors
The opinions on this document are ours and we take all responsibilities for it.
The aim of the documents is prepared reflecting the current tax regime with the aim of proposing changes that will increase revenue collection and at the same protecting and enhancing the growth of our economy.
We; Panafrican Auditors; being good citizens have the responsibility of being part of the economy
1, Introduction of the Tax Ombudsman
The Government is proposing for the introduction of the Tax Ombudsman
Problems:
We are of the opinion that the Introduction of the Tax Ombudsman might bring contradiction as
there are existing laws and systems dealing with similar responsibilities as those of the proposed
Tax Ombudsman.
They include:
i) The PCCB Act
ii) The Tax Appeals Act
The Government is proposing for the introduction of the Tax Ombudsman
The budget speech is hereby reproduced:
‘Honourable Speaker, the Government will undertake various policy and administrative
measures so as to strengthen and simplify revenue collection. The measures among others
include:- (i) Establishing an independent “Office of Tax Ombudsman” which will be
responsible for receiving correct and unbiased information and complaints from taxpayers or
other people with good intention against administration of tax affairs by Tanzania Revenue
Authority. The office of the Ombudsman, will be coordinated under the Ministry of Finance
and Planning. The major functions of the office of the Ombudsman will include;
(a) Receiving and working on corruption complaints against TRA officials;
(b) Receiving and working on arbitrary assessments complaints against TRA officials;
(c) Receiving and working on unlawful closure of businesses complaints against TRA officials;
and
(d) Receiving and working on any similar complaints regarding tax administration against
TRA officials.’
The major functions of the proposed independent organ (Tax Ombudsman) are dealt with the above
mentioned acts and there are systems and procedures in place. This could create confusion on who
is to what and what are the limits of each of the apparatus in dealing with similar functions. To be
sincere this could be duplication of efforts.
The functions of the Tax Ombudsman shall be:
(a) Receiving and working on corruption complaints against TRA officials;
All allegations against corruption are stipulated in the anti-corruption Act (PCCB Act)
(b) Receiving and working on arbitrary assessments complaints against TRA officials;
Any tax payer aggrieved by any tax assessments by TRA or TRA officers has got remedies
under the Tax Administration Act, 2015 and the Tax Appeals Act
(c) Receiving and working on unlawful closure of businesses complaints against TRA
officials;
Again this is dealt with Tax Administration Act, 2015 and the Tax Appeals Act
(d) Receiving and working on any similar complaints regarding tax administration against
TRA officials.’
This is also dealt with the Tax Administration Act, 2015 and the Tax Appeals Act
Our opinions on the tax payers remedies in case of complaints against tax assessments or against any tax officer are as follows:
a) To scrap-off the requirements of depositing one-third of the assessed tax or an amount not in dispute; whichever is greater
This requiurement is denying tax payers of their right as it might be difficult for tax payers to raise the deposit . Equally arbitrary assessments done by TRA officers are also counted in calculating the one-third deposit.
The reasons for this is as follows:
i) Upon tax objection or appeal; it is not clear whether TRA assessments are correct or are not correct. And TRA and the aggrieved tax payers are at loggerheads fighting for and against the tax assessments; then why should the tax payer be compelled to deposit onethird of the amount he or she is objecting/appealing against.
Refer section of the Tax Administration Act, 2015 and is hereby reproduced for ease of reference:
ii) Upon receiving the deposit; the Government might uses the funds to defray expenditures approved by the Parliament of the United Republic of Tanzania ; even before the final determination of the object/appeal. However this was when the Tax Revenues were accounted for under IPSAS Cash Basis.
However, of recent the Government decided to prepare the Financial Statements for Tax Revenues (TRA Accounts) on IPSAS full-compliance.
Under IPSAS Accrual basis; the deposit by the tax payer as a pre-condition for tax objection or appeal is treated as restricted cas
Logically; the deposit as a pre-condition for tax objection/appeal is no longer needed. Previously it was aimed at helping the Government cash flows during the tax objection/appeal process as the money could be spent on Government expenditures. Now it is not acceptable under IPSAS Accrual.
iii) Upon final determination of the tax objection or appeal; the deposit is refunded to the tax payer if the ruling is in his/her favour. However there is not time-value of money considered on this deposit and hence no interst is charged by the tax payer. We are proposing at least a nominal interest rate to be applied at least to cater for inflation during the tax objection/appeal process
iv) This should be considered in the contex that the tax payer coud have invetsed the funds in the business and earn profits or has got the funds through debt-instruments for example bank loans that attracts huge interests and penalties.
v) It should be borne in mind that the objection/appeal process is very slow; and as per TRA Quality Assurance requirements; the objection is to be finalized within six months. But in practice it takes ages.
b) To establish tax objection offices at district and regional levels that are independent of tax officers
The objection/appeal process is very difficult for SMEs as it involves a lot of procedures and documentations that are costly to prepare involving tax experts and legal counsels.
This process should be simplified especially for SMEs
Equally the practice now that tax objections are dealt with by the same TRA officers and in most cases in same TRA office premises as those tax officers who did the assessments in the first place. The independence of the tax objection officers seems to be impaired.
c) Remove the requirement to appeal to the TRA Commissioner General as the First Level objection stage.
Currently; the first objection stage is the Commissioner General. Imagine appealing to the nsame Commsiioner General who issued you with the Tax Assessments.
The second level is the Tax Revenue Appeals Board and thord level is the Tax Revenue Appeals Tribunal
Our opinion is to establish offices of the Tax Revenue Appeals Board at Regional Level
Other proposal
i) Remove the requirements for the TRA Commssioner General to register Tax Consultants – Section ____
The registration of the Tax Consultants should not be done by the TRA Commsiioner General as it is now under section ___
Imagine the advocates being registered by judges or defendants.
We are proposing for Tax Consultants to be registered by the Regulator of the Accounting Profession; the National Board of Accountants and Auditors (NBAA)
You cannot be a tax consultant unless you are an acoountant and or an auditors; and you cannot practice accountancy or auditing in Tanzania without being registered by NBAA.
ii) On changes in tax rates
a) The scrapping of VAT on ladies towels and granting a 25% Corporate Tax on Investors on ladies towels manufactures is not logical.
Manufacturing companies have very huge capita outlays and will obviously be absorbing losses in the first two years of operations and hence no corporate tax will be paid.
We are proposing for re-instating the VAT exemption on ladies towels
iii) Taxpayer education scheme
Maintain taxpayer education champion in every TRA office, but ensure that every TRA officer is responsible for educating taxpayers in his/ her area of operation as part of the day to day service provision to taxpayers.
Equally could set-up tax-kiosks as information centres to tax payers.
iv) Reliance on human capital and expertise that is limited across the country in terms of quantity and quality.
The current tax regime is heavily reliant on paper work and its efficiency depends on the quality of service provided by its human resource. Reliance on human expertise attracts bureaucracy; lengthy processes and inefficiency as the human expertise is limited across the country. The current system encourages feedback delays to taxpayers and creates attractive environment to taxation. Policy changes that focus on system automation will help to promote robust tax systems and promote compliance.
v) A less stable and competitive fiscal policy.
To attract massive investment and foreign direct investment a nation needs a stable and predictable fiscal policy that offers a competitive business environment. A policy has to be responsive and flexible to changing economic circumstances at the same time it should be fairly stable and predictable in a way that does not cause panic to tax payers. And as most economies are exposed to global competition; tax rates should be competitive to attract the flow of investments.
vi) Other Fiscal Policy Area Proposed Processes and Systems
1. Registration of Tax payers • Link personal information databases with taxpayer’s databases through single point registration i.e integrate National ID, Voters Registration Registers, BRELA databases with tax systems.
2. Register taxpayers in tax blocks with specific tax rates for each block. For example Tax block 1 may include Motor vehicle drivers “Bodaboda”, Block 2 may include “Machinga” etc
3. Identification of Tax payers • All persons over working age have to identified through an Identification ID and connected to database with all necessary personal data
4. Map tax points for easy administration and compliance purposes such as; mapping parking centres, property locations, large and robust business areas etc
5. Promote tax payers identification and registration at the local authority levels through engaging local government leaders.
6. Automate Tax processes • Promote innovative tax management systems that can be easily accessed through mobile devices with automated assessments. Include the filing of all tax returns automatically for example the Income Tax Return. Authentication of auditors reports could be verified through peripheral access by auditors certifying financial statements.
7. Promote e-tax systems that enable filing returns via online portals connected with auditors and tax consultants for authorizations and approval on the authenticity of data.
8. • Improve the use Fiscal devices (EFDs) by modifying the system not only to register sales records but also record expenses and produce a simplified income statements.
9. • EFDs should contain automated intelligence systems that provide real time interconnected EFD data that can track the flow of transactions among businesses.
10. • The automated Fiscal device should be capable of providing real time data on income statement; cash management; time review and audit; intelligence system.
11. • Promote payment of taxes through all digital forms and provide real time digital acknowledgement feedback through e-mail or sms notifications.
12. Communication and Customer service • Enable real time communication channels between administrators and clients
13. • Provide real time reminders through mails or push SMS when tax liability is due
14. • Publish and disseminate tax calendars 15. • Promote tax awareness through media campaigns and advocacy and outreach campaigns especially to informal sector groups.
16. • Create simple tax forms both in manual and digital forms with simple tax information that can be understandable to all persons. Tax processes should also be simplified to be understandable by all persons.
17. Legal framework • Reduce tax rates and provide exemptions for youth startup businesses to promote self-employability and growth of SMEs.
18. • Reduce tax incidence and burden by merging some taxes to promote single tax filling and simplifying compliance.
19. • Reduce property tax administration costs by merging it to utility taxes. The new rate should be little not to hike production costs. Merging property tax into utility taxes will increase the tax base and reduce collection costs.
20. • Set amicable dispute resolution mechanisms among tax payers and clients for tax disputes before resorting to tribunals by focusing on tax payers’ ability to pay without resorting to business closure or forceful compliance.
21. • Resolve tax objections speedy and timely
22. • Amend the requirement for deposit of 1/3 of tax liability under dispute pending resolution as fully adoption of the IPSAS Accrual basis does not permit TRA to account for the amount as collections. Also the deposit may have severe liquidity implications to the tax payers business and at the same from the legal point of view the deposit acts as being held guilty before adjudication.
23. • Acknowledge tax payers from the informal sector; classify them into blocks and charge low tax rates that would attract voluntary compliance.
24. • Part of collected taxes should be retaken to improve services to the contributing sectors or tax persons/groups to promote a culture of paying taxes.
25. • Establish community policing for reporting tax frauds, emerging businesses in the informal sector or tax avoidance by empowering grass root local authority leaders. For example local leaders can be effective in reporting rental taxes, potential resident tax payers etc.
26. • Turn social groups into semi - formal recognized groups and sustainable income generating units. For example tax exemptions and special exemptions such as subsidizing health pensions for these groups can turn healthy jogging clubs into economic schemes while improving universal health accessibility.
27. • Reduce Value Added Tax (VAT) for competitive sectors to attract investment and improve business competitiveness with other East Community partners. It is proposed to reduce the rate to the lowest competitive rate for products competing for the East African market.
28. Remove VAT on Imported Capital Goods to boost productivity and investment.
29. Change the timing of supply for VAT to be cash-based and not accrual as it affects the cash flows of businesses especially those on credit sales.
30. We are also requesting for the URT to put more efforts on integration of the African economies especially on Continental Customs Management.
By Rahim Mzee Kachwamba
Partner
Panafrican Auditors
