Enquiries from Tanzania Revenue Authority (TRA) can come in many forms. An enquiry can be a question or request for information (through a phone call, a text message, an email, a letter or even a one-to-one conversation). And some tax enquiries can be more formal and deeper than just the simple questions or requests. For example, audit, investigation, verification exercise, inspection, or even search of premises or your home. Unlike enquiries from your other stakeholders, say your customers or suppliers, enquiries from a tax authority need to be handled with extra care. Knowing your obligations, your rights, TRA powers and consequences can help you manage the enquiries more effectively.
You have various legal obligations under the tax laws. The obligation to keep documents and information about your business for at least five years. The obligation to provide accurate and complete information. The obligation to grant free access, facilities, and assistance to TRA. Providing false or misleading information to TRA is an offence. Failure to provide information, access, facilities, or assistance may also be charged as an offence for impeding tax administration.
You may decide not to, voluntarily, cooperate with TRA. But that may not be as helpful. Apart from your legal obligations and the possible sanctions thereof, tax laws give TRA massive powers to gather information from taxpayers directly and through third parties. And TRA can exercise most of their powers without court orders. TRA have powers to access any of your assets, information or premises at any time. The only exception is dwelling houses where a court order is required for access between 6 pm and 9 am. TRA can use experts or officers from other government institutions such as the police. TRA can also seize, retain, and restrain assets or documents. TRA can also restrain persons.
Some enquires may appear quite simple at the beginning. But later extend to more serious tax enquiries like a tax audit or even a tax investigation if a tax crime is suspected. Tax enquiries may not necessarily end in a tax liability. But most of the enquiries will do. Especially if they are not handled carefully. Either a new tax liability or an amended one. Even in cases where TRA is unable to gather information from you, TRA can use third-party information or use their best judgment to estimate tax liability.
Again, TRA has massive powers to collect taxes. They have various tools at their disposal to collect the tax directly from you the taxpayer. In this respect, TRA can create a charge over your assets, sell your charged assets, restrain your assets, or even restrain you if you are likely to flee. TRA is also empowered to collect from third parties. If you are an entity, TRA can collect the outstanding tax from managers or directors of the entity. TRA can also collect your debtors, guarantors, receivers or liquidators and agents.
But despite the massive powers given to TRA, as a taxpayer you also have some rights. TRA, with limited exceptions, is obliged to treat information collected from you as “secret and confidential”. During a tax enquiry, you may decide to be represented or assisted by your tax consultant. You may decide not to cooperate with TRA officials if they fail to properly identify themselves. You also have a right to reasonable compensation for lost or damaged documents, assets or sample retained by TRA. There is also a statute of limitation where TRA is barred from amending your tax return after five years.
By Shabu Maurus, Tax Partner, Auditax International.