Happy New Year 2020 and I hope you're looking forward to a successful year ahead! As we start the year 2020, most of us have a multitude of resolutions. It is normal. Some would write them down and some may not. Some resolutions may be about money, business or money-related. This, of course, depends on the activities you are engaged in. The tax landscape in Tanzania has significantly changed during the last few years. The tax laws are changing. The tax authority (TRA) is also becoming very aggressive in their interpretation of tax laws as well as the actual tax collection. Also, several tax cases have been decided (in the tax courts) that have changed the way some aspects of tax laws are interpreted.
Setting resolutions may be easy but accomplishing them may be quite difficult. Several challenges can come on your way. And tax is likely to one of them. This is especially true if you are in business and you are not actively managing your tax affairs. Handling of your tax affairs can no longer be business as usual.The consequences for not managing your tax affairs are numerous. And most of these are likely to come as a surprise. TRA can demand tax from you based on their best judgement if you have not supplied them with sufficient business information. Some of the demands can be very frightening to your business. Penalty and interest can also be demanded. Your business premises can be closed leading to losses as business operations stop. The tax authority can also recover tax directly from your bank accounts. TRA can also recover tax from some or all your customers who buy from you on credit. Any of these can be enough to paralyze your well-crafted resolutions!
Tax compliance broadly may involve registration, de-registration, filing of tax returns, making tax payments, or giving the tax authority business information. The question is: is your organisation aware of these various obligations as they relate to its business? Not doing any of those actions within the prescribed timelines may attract unexpected penalties. If the inaction amounts to an offence, a fine or jail term or sometime both may apply. And as predicate offences, tax offences caneasily lead to money laundering charges.
Sometimes non-compliance with tax can happen due to the organisation's failure to apply tax laws, regulations and decisions to routine business operations. For example, selling a product to a sister company may have different tax implications from selling the same product to the un-related company. Non-compliance can also come from failure to correctly apply the relevant tax laws to specific transactions. This is especially likely for unusual or non-routine transactions. It can be a sale of fixed or capital assets, sale of business or part of a business or a restructuring project. For example, sale of building, land or share is subject to specific tax treatment.
Tax management is a systematic process within an organisation. A process to identify, assess, prioritize and respond to the tax risks facing your organisation. Does the board of directors or management of the organisation know all taxes that their organisation is obliged to comply? Ultimately, it’s the board that is responsible for actions or inactions of their organisation. It is not uncommon to find out that some organisations do not even know all the taxes that they are required to comply. Shabu Maurus, Tax Partner, Auditax International