The genesis of most tax disputes is either an assessment by the TRA or a decision by the Commissioner. Once this happens then the tax dispute resolution mechanism, which can be categorised in two parts, is set in motion.
The first part of the mechanism is the administrative appeal process at the TRA level while the second part involves the judicial adjudication forums i.e. the Tax Revenue Appeals Board (the Board), the Tax Revenue Appeals Tribunal (the Tribunal) and ultimately the Court of Appeal of Tanzania.
Therefore, once there is a dispute under the substantive statutes (e.g. the Income Tax Act Cap 332, the VAT Act Cap 148 etc.), the two statutes which anchor the framework come into play i.e. the Tax Administration Act Cap 438 which deals with the administrative appeal process at the Commissioner's level; and, the Tax Revenue Appeals Act Cap 408 which deals with the appeals process at the judicial adjudication forums i.e. the Board and the Tribunal.
Appeals at the Commissioner's level
The Commissioner is allowed to make any tax decision including assessments or other decisions or omission on a matter left to his discretion, judgement, opinion, approval, consent, satisfaction or determination under a tax law that directly affects a person1.
A taxpayer who is aggrieved by such a decision made by the Commissioner (e.g. a Notice of Assessment) is required to file a Notice of Objection within 30 days2. However, before his Notice of Objection can be admitted the Commissioner (and be considered on it is merits), he is required to first pay the higher of a third of the assessed tax or the tax not in dispute3. He is also entitled to apply to the Commissioner for a waiver of the requirement to pay this amount and the Commissioner can exercise his discretion to either waive the entire tax deposit or he may require the payment of a lower amount4.
Once the Commissioner has admitted the Notice Objection, he may request for additional information from the taxpayer which he deems necessary to assist him to arrive at a decision with regard to the contentious issue for which the Notice of Objection was filed5. While considering a taxpayer's Notice of Objection, the Commissioner may propose amendments to the initial Notice of Assessment that had been issued before issuing his Final Determination. After he has reviewed such information and considered the Notice of Objection on its merits, he then proceeds to issue a Final Determination6.
Appeals at the judicial adjudication forums
After the administrative process at the TRA level is dispensed with, the judicial adjudication process can then be set in motion. The law expressly prohibits a taxpayer from appealing against the proposed amendments suggested by the Commissioner while he is considering the Notice of Objection. Therefore, by implication, the Act has defined objection decision to be the Final Determination by the Commissioner after exhaustively considering a taxpayer's Notice of Objection7. On the other hand, other decision adopts its broad definition from the wording that is used in section 50 to define tax decisions.
The law provides that if a person is aggrieved by an objection decision or other decision or omission of the Commissioner, he may then appeal to the Board in accordance with the provisions of the Tax Revenue Appeals Act Cap 4088.
Previously, taxpayers would file all their appeals to the Board under the then omnibus section 16(1) of the Tax Revenue Appeals Act Cap 408 which provided that:
'Any person who is aggrieved by the final determination by the Commissioner General of the assessment of tax or a decision referred under section 14 of this Act may appeal to the Board.'
The scope of this provision was narrowed down when the Tax Administration Act Cap 438 amended it to read as follows:
'Any person who is aggrieved by an objection decision of the Commissioner General made under the Tax Administration may appeal to the Board'.
Section 16(1) did not narrow down the scope of what the Board and the Tribunal can entertain; the amendment narrowed the scope of what can be instituted under section 16(1) to only objection decisions. This meant that the Board would only be able to entertain appeals resulting from objection decisions under section 16(1); appeals stemming from other decisions would have to be initiated under other enabling provisions e.g. section 7 which grants the Board "...sole original jurisdiction in all proceedings of civil nature in respect of disputes arising from revenue laws administered by the Tanzania Revenue Authority".
Panafrican Energy Tanzania Ltd versus Commissioner General (TRA)
In the event that the Commissioner rejects the request for waiver of a tax deposit unfairly, where can an aggrieved taxpayer seek recourse? Does the unfair refusal by the Commissioner amount to an objection decision [under section 16(1)] or other decision [under section 7]? These were the questions that came up for consideration by the Court of Appeal in its recent decision in Panafrican Energy Tanzania Ltd versus Commissioner General (TRA)9.
In this case the Commissioner issued Panafrican Energy Tanzania Ltd with two tax assessments alleged an outstanding tax liability. The company sought a waiver from the requirement to pay a tax deposit and filed two Notices of Objection for each of the assessments. The Commissioner responded to the application for waiver negatively indicating that he had not found good reasons for granting the waiver and therefore the company's request was denied and it was required to pay the deposit before its Notices of Objection could be admitted as considered on merit.
Dissatisfied, the company initiated an appeal against the Commissioner's decision at the Board as an objection decision under section 16(1). The Board, in the interest of justice, reduced the tax deposit payable to pay 5% of the total assessed amount and after which the Commissioner was to admit and determine the Notices of Objection based on merit.
Panafrican Energy was unhappy with the Board's decision and filed an appeal at the Tribunal which in its decision dismissed the appeal and upheld the Board's decision. The company then appealed the Tribunal's decision to the Court of Appeal where the key questions for determination were:
- whether an appeal lies to the Board against the Commissioner's refusal to grant an application for the reduction or waiver of an assessed amount; and,
- whether the appeal in this case should have been instituted under section 16(1) of the Tax Revenue Appeal Act Cap 408.
In its decision the Court of Appeal held as follows:
- The broad section 53(1) of the Tax Administration Act Cap 438 allows the Board to entertain "...a person who is aggrieved by an objection decision or other decision or omission of the Commissioner..."
- Section 53(1) requires "...that an appeal to the [Board] has to be [instituted] in accordance with the provisions of the [Tax Revenue Appeal Act Cap 408]..."
- While previously appeals against the Commissioner's refusal to grant a waiver could be filed under the broad section 16(1), after the amendment by the Tax Administration Act Cap 438, the scope of what can be brought before the Board under section 16(1) was "...narrowed down to an objection decision of the [Commissioner General] made under the Tax Administration Act Cap 438..."
- An objection arises once the Commissioner has considered and made a determination with regards to a Notice of Objection which has been admitted and considered on it merits;
- In the present case "...there was no objection decision of the [Commissioner General]...and going by the specific language used in section 16(1), the purported appeal before [the Board] which did not result from on objection decision of the CG was incompetent..."
Our view and interpretation of the decision
In arriving at its decision, the Court invoked its revisional jurisdiction powers10 and quashed the earlier decisions by the Board's and Tribunal's decisions based on the fact that their appeals that each had determined had been erroneously instituted under section 16(1) and therefore the ensuing decisions were void.
There has been a number of commentaries about this decision which have alleged that the Court of Appeal ousted the Board's and Tribunal's jurisdiction with regards to entertaining appeals against the Commissioner's exercise of his discretion and refusal to waiver the tax deposit requirement. We differ with this view.
In answering the first question - whether an appeal lies to the Board against the Commissioner's refusal to grant waiver - the Court of Appeal was unequivocal that "...a person who is aggrieved by an objection decision or other decision or omission of the Commissioner..." can appeal to the Board. However, while doing so, the aggrieved person has to invoked and proceed under the correct enabling provision of Tax Revenue Appeal Act Cap 408. The amended to section 16(1) narrowed what could be initiated under that section, the amendment did not narrow the scope of what the Board and the Tribunal could entertain.
A section 16(1) objection decision arises once a Notice of Objection has worked its way through the administrative dispute resolution process and the Commissioner has issued a Final Determination. Since the amendment to section 16(1) narrowed down the scope of what can appealed against to 'objection decisions', what then is the fate of 'other decisions' as envisaged under section 50(1) and section 53(1)? Does it then mean that the Commissioner's 'other decisions' are final and cannot be appealed against since they fall outside section 16(1)? Certainly not.
Appellate jurisdiction cannot be implied, it is granted by statute. The amendment to section 16(1) in 2015 meant that those wishing to appeal against the Commissioner's other decision refusing waiver of the tax deposit have to anchor their appeals on section 53(1) of the Tax Administration Act Cap 438 as read with the correct enabling provision of the Tax Revenue Appeal Act Cap 408 which in our view would be section 711 which reads as follows:
'The Board shall have sole original jurisdiction in all proceedings of a civil nature in respect of disputes arising from revenue administered by the Tanzania Revenue Authority'
If one adopts the interpretation that the Court of Appeal ousted the jurisdiction of both the Board and the Tribunal with regards to tax deposits it means that the Commissioner has unfettered powers and can exercise his discretion in whichever way he deems fit and the taxpayer has no recourse. This interpretation goes against the rule of natural justice.
In addition, such an interpretation means that a taxpayer aggrieved by 'other decision' would have to seek redress through a judicial review application to the High Court12. How then does one reconcile this with section 7 which gives the Board sole original jurisdiction in all proceedings of civil nature in respect of disputes arising from revenue laws? If indeed the intention of the Court of Appeal was to oust the jurisdiction of the Board and the Tribunal with regards to entertaining disputes relating to tax deposits, they should have answered that question in the context of the broad section 7 and not the narrow and specific section 16(1).
Who does this decision impact?
There are also tax appeals relating to the Commissioner's refusal to grant waiver of the tax deposits which are at various stages in the tax dispute adjudication process and which had been filed under section 16(1). These may be appeals that were filed before or after section 16(1) was amended. It is likely that at the point of hearing the Board or Tribunal might strike these out for being instituted under the wrong provision. Where this happens, the taxpayer is not precluded from instituting a fresh appeal in respect of the same matter subject to the law on limitation of time13.
There is also the option of amending the Statement of Appeal that had been filed14 in order to reflect the correct provision or withdrawing the appeal15 and applying to file a new appeal under the correct provision but this is subject to the consent of the Board or Tribunal.
For those who have been aggrieved by the Commissioner's decision on their tax deposit waiver applications, they should ensure that their appeals to the Board are filed under the correct provision.
1. Section 50(1) of the Tax Administration Act Cap 438
2. Section 51(1) of the Tax Administration Act Cap 438
3. Section 51(5) of the Tax Administration Act Cap 438
4. Section 51(6) of the Tax Administration Act Cap 438
5. Section 52(1),(2),(3) of the Tax Administration Act Cap 438
6. Section 52(5) of the Tax administration Act Cap 438
7. Definition of 'objection decision' in the Tax Administration Act Cap 438 as read with section 7A of the Tax Revenue Appeals Act Cap 408
8. Section 53(1) of the Tax Administration Act Cap 438
9. Court of Appeal of Tanzania at Dar es Salaam, Civil Appeal No 121 of 2018 (unreported)
10. Under section 4(2) of the Appellate Jurisdiction Act Cap 141
11. Amended by Finance Act 2007 (No. 19 of 2007)
12. The Court of Appeal has held that the High Court does not have jurisdiction to entertain tax disputes relating to substantive issues. Tanzania Revenue Authority versus Tango Transport Company Ltd, Court of Appeal of Tanzania at Arusha, Civil Appeal No. 84 of 2009 (unreported)
13. Rule 9 of the Tax Revenue Appeals Board Rules, 2018 (GN No. 217 of 18th May 2018) and Rule 8 of the Tax Revenue Appeals Tribunal Rules, 2018 (GN No. 222 of 18th May 2018)
14. Rule 18 of Tax Revenue Appeals Board Rules and Rule 18 of the Tax Revenue Appeals Tribunal Rules 15. Rule 21 of the Tax Revenue Appeals Board Rules, 2018 and Rule 20 of the Tax Revenue Appeals Tribunal Rules, 2018
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.