- Defining “Agency Notices” in tax law perspective
- A summary of the law in place in Tanzania
- Scope of amendment and implications to the powers of Commissioner General TRA to issue Agency Notices.
On 27th February 2020, the Ministry of Finance and Planning passed the Tax Administration (General) (Amendments) Regulations, 2020 (hereinafter referred to as “the Amendments Regulations”) which amended the Tax Administration (General) Regulations, 2016 (hereinafter referred to as “the Principle Regulation”).
The Amendments Regulations amends Regulation 91 of the Principle Regulations, which authorizes the General Commissioner to serve the Agency Notice to the third party debtor who owes money to the taxpayer.
2.0 Operation of Agency Notices and Amendments
The notion of Regulation 91 of the Principle Regulations was introduced by Section 67 (1) of the Tax Administration Act, 2015 which provides that where a taxpayer fails to pay tax on time, the Commissioner General may serve on the third party debtor who owes money to that taxpayer a notice in writing that person to pay the money to the Commissioner General. As of recent times, the TRA has been renown for enforcing recovery of revenues through serving Agency notices to third parties which holds moneys belonging to defaulting taxpayers. Most of these notices are usually served on banking and financial institutions. Compliance to such notices is uncompromising and unadvised due to the powers vested to TRA on this aspect of recovery.
Regulation 2 of the Amendments Regulations amends Regulation 91 of the Principle Regulations by adding sub-regulation 3 which states that, “Subregulation (1) shall not apply to bank accounts held in banks in the United Republic by mining companies in which the Government of the United Republic has shares and has concluded an agreement with the company unless there is a court decree issued to the Commissioner General after final completion of judicial proceedings.”
Basically, Regulation 2 of the Amendments Regulations restricts powers of the General Commissioner to act as an Agent for the purpose of collecting tax through third party debtors where the taxpayer fails to pay tax on time if such taxpayer is in mining business and more so, is in joint venture terms with the URT Government.
Although the Commissioner General can serve Agency Notice under Section 67 (1) of the Tax Administration Act, 2015, he is stopped from serving the same to the banks in Tanzania where the tax payer is the mining company whose some of its shares are owned by the Government of Tanzania or there is an agreement between the Government of Tanzania and the mining company.
As per the amendments, the saving of the Commissioner General’s powers is when he can exercise his powers under Section 67 (1) of the Tax Administration Act, 2015 and Regulation 91 (1) of the Principle Regulations where the tax matter has been adjudicated and finalized with a Court Decree obtained in favour of the taxing authority, that is, in favour of the Commissioner General of TRA.
Breakthrough Attorneys’ tax team believes that this change has been brought to ensure that mining entities that are connected to the Government enjoy an unhampered operating ability even when there are tax disputes pending with the taxing authority. This is heralded and commended. Nonetheless, from experience, Agency Notices tend to freeze cash flow movements and companies’ liquidity and subsequently, freeze many companies’ operations. In the recent period, TRA has been operating within the ambit of section 67 and issues Agency Notices widely for proper revenue collection. It is our call that the same be done vis-à-vis more checks and balances to ensure that the investment space in the country is not affected by overregulation, over taxation and more certainly, strictest recovery measures before all legal avenues are exhausted.
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