This time last year, we had just started to appreciate the relative permanence of what many of us believed would be a brief fight with the COVID-19 pandemic. We had all heard of the ‘Delta Variant’, but no one thought we would be still be grappling with an Omicron variant at the end of the year. No Tanzanian was officially vaccinated, the Commissioner for the Tanzania Revenue Authority was a different man, and the tone of the tax revenue authority, we can all agree, was a tad more aggressive than it is right now.
If we have learned anything in the last twelve months, it is probably that it is unwise to make predictions. In the age of COVID-19 with its iterating variants, and a rapidly shifting global economic landscape, even the best forecasters are rendered inept by the sheer number of moving economic and political parts.
I am, however, willing to bet that we will still be paying taxes this time last year. Death and taxes are truly the most certain occurrences. That being the case, one should be careful with the kind of predictions they are willing to make. In her New Year Eve’s message on December, 31 2021, President Samia Suluhu Hassan indicated that the focus of the government this year would be to help Tanzanians better deal with their day to day needs. The COVID pandemic has been more persistent than anyone anticipated, it is the intention of the government to help cushion the country from the adverse impacts of the pandemic. It is also clear that the government intends to spend on infrastructure, both physical and human, with some of the funding coming from external borrowing.
In that context, how does one prepare for 2022? I think the question is not what to prepare for. We do not know precisely what will happen. The best way to prepare therefore is just to remain ‘tax vigilant’. There are three areas of that vigilance that must be taken into account; compliance, dispute resolution and proactive regulator engagement.
Compliance can no longer be negotiable. It is true that the TRA has taken a more accommodative approach to dealing with taxpayers. There have also been some welcomed legislative changes recently, including the reduction of the punitive 100% penalties on transfer pricing adjustments as well as the there being room now for taxpayers to access waivers of interest and penalties. However, it is important to remember that most of the dispute resolution process is avoidable, for a large part, if compliance is given a priority.
With the increased digitisation of the tax filing process, it is very clear that right now any non-compliance imposes an immediate penalty. Vigilance for tax purposes will mean making sure that the tax filings are done on time. It means following up on the potential changes that come up during the year. It also means that one has to be proactive with making sure that technically vague items or aspects of tax are clarified. In addition to compliance, one must be vigilant with dispute resolution. Disputes typically arise out of two principal situations. One situation is when there is a divergence of a legal or practical interpretation of the law between the taxpayer and the tax authority. The other source of dispute is the degree to which factual matters are contested by the two parties.
To address the first one, a taxpayer is advised to seek clarification from their tax advisor or tax authority. In some cases, it may be wise to seek an actual private ruling. However, with the second one, one needs to be very proactive with not just being compliant, but also making sure that there is sufficient information useful to support the reported incomes and tax payable.
The last thing to be vigilant about is proactive engagement with the law-making process as well as other regulators. This is something that is perhaps not done enough by taxpayers in Tanzania. As industry players, items like new taxes, tariffs and levies should not come as a surprise. Despite the flaws in the budget process in Tanzania, there are still avenues for taxpayers to make sure that they are heard and their pain points are taken into account. This process starts all the way from the budget making stage to the execution stage.
There are plenty of platforms for taxpayers to engage with the tax making process. For example, there is already a platform for taxpayers to present proposals to the think thank for tax reform. Other avenues include presenting proposals from platforms such as the Tanzania Private Sector Foundation. The important thing to remember is that it is the job of the taxpayer to get their voices heard and legislation adjusted.
A happy new year, and hopefully one where we are all more tax vigilant.
Samwel Ndandala is a Senior Manager with Deloitte Consulting Limited. The views presented are his own and not necessarily those of Deloitte. He can be reached at firstname.lastname@example.org