On 31 May this year, Tanzania’s apex court, the Court of Appeal of Tanzania, delivered a landmark ruling on an appeal filed by PanAfrican Energy Tanzania Limited against the decision of the Commissioner General of the Tanzania Revenue Authority (TRA) refusing to grant a waiver of the objection tax deposit. This article attempts to summarize the ruling and highlight the possible ramifications of the same to businesses in Tanzania.
But first, by virtue of section 51(5) of the Tax Administration Act, 2015 (“the TAA”), a taxpayer is required to deposit the higher of one third of the assessed tax or an amount which isn’t in dispute before submitting an objection to a tax decision of the Commissioner General. Under section 51(6) of the TAA, the Commissioner General is allowed to waive the deposit on being satisfied that there are good reasons to do so.
It is trite to point out that taxpayers usually face difficulties in paying the deposit because of a dearth of cash flow in the face of the determination of what constitutes “goods reasons” being at the discretion of the Commissioner General. Consequently, there has been a pile-up of tax cases on this issue in the Tanzanian tax adjudication system.
PanAfrican Energy Tanzania Limited v. Commissioner General TRA, Civil Appeal No. 121 of 2018 (“the PanAfrican Energy case”) is the outcome of such difficulties. In this case, the TRA issued assessments to PanAfrican Energy Tanzania Limited (“PanAfrican Energy”). PanAfrican Energy objected to the assessments and applied for a waiver of the one third deposit requirement to pave way for its objections to be admitted and determined. However, the Commissioner General declined to admit the objections and emphatically stated that besides the application not disclosing “good reasons”, it related to matters that would be the subject of the objection proceedings.
Aggrieved by this decision, PanAfrican Energy filed an appeal in the Tax Revenue Appeals Board (TRAB), which upheld the Commissioner General’s decision but ordered PanAfrican Energy to pay a less amount of 5 percent of the assessed tax. PanAfrican Energy appealed against this decision to the Tax Revenue Appeals Tribunal (TRAT), which agreed with the TRAB’s decision and dismissed the appeal. Again, aggrieved, PanAfrican Energy appealed to the Court of Appeal of Tanzania (“the Court of Appeal”).
The Court of Appeal, acting on its own motion, raised a point of law on the competence of PanAfrican Energy’s appeal before the TRAB and, like the proverbial doubting Thomas, queried whether that appeal was properly lodged.
PanAfrican Energy argued that although section 16(1) of the Tax Revenue Appeals Act, Cap 408 (TRAA) allows an appeal to the TRAB on objection decisions only, on the strength of section 53(1) of the TAA the appeal at the TRAB was competent for the reason that the Commissioner General’s decision to refuse the waiver of the tax deposit falls under the gamut of ‘other decisions’ as envisaged under the latter provision.
The Commissioner General argued that the decision to refuse to waive the tax deposit is not an objection decision and therefore not appealable. The decision, being a final decision, can only be challenged via judicial review of administrative action, the Commissioner General further argued.
After hearing the parties’ arguments, the Court of Appeal ruled that relevant provision for appeals to TRAB is section 53(1) of the TAA, but the right to appeal must be exercised in accordance with the TRAA, in respect of which section 16(1) permits appeals to the TRAB on only objection decisions reached by the Commissioner General. Invoking its revisionary powers, the Court of Appeal struck out the appeal that was before it and subsequently invalidated the proceedings and decisions of the TRAB and TRAT.
Implications of the ruling to businesses
As a result of this, appeals filed by taxpayers against the Commissioner General’s decisions on objection tax deposit waiver that are awaiting determination at the TRAB and the TRAT will probably collapse on the same point of law on competence. This is because the TRAB and the TRAT are bound to follow the decision made by the Court of Appeal of Tanzania.
It is instructive to note that the Court of Appeal did not delve into the merits of the appeal that was brought before it by PanAfrican Energy, and so it missed the opportunity to clarify on what constitutes “good reasons” for the purposes of granting waivers of objection tax deposits. This implies that waiver requests will continue to be considered at the discretion of the Commissioner General.
Further, the ruling of the Court of Appeal in the PanAfrican Energy case means that the decision of the Commissioner General on waiver of objection tax deposits likely falls under the scope of “other decisions”. And what is more, because section 16(1) of the TRAA permits appeals to the TRAB on only objection decisions, businesses aggrieved by the decision of the Commissioner General may object to the decision under section 51 of the TAA and, when dissatisfied with the Commissioner General’s decision on their applications for waiver of objection tax deposit, appeal to the TRAB.