INEFFICIENCY of tax appeal system is costing the country trillions of shillings in terms of lost revenues and cost of running the cases, the Controller and Auditor General (CAG) has discovered.
The CAG, Professor Mussa Assad, in his
central government annual general report for the 2015/16 financial year,
pointed out that as compared to the previous report, tax revenue tied
up on appeal cases has increased from 6.85tri/- to 7.273tri/- in the
2015/16 fiscal year.
“This is an increment of 423bn/-,
equivalent to six per cent. My analysis indicates potential revenues
tied up on appeals account for 32 percent of the total government budget
estimates and seven per cent of the nominal Gross Domestic Products for
the year 2015/16,” he said.
The CAG described the colossal amount
tied up as an indication of inefficient tax appeal system, which compels
the government to incur huge amount to run cases for long time and loss
of revenues when the appellants become bankrupt before their appeals
are resolved.
Professor Assad pointed out that his
audit during the year 2015/16 year noted that 140 applications for tax
objections involving 858bn/- were filed by the taxpayers to dispute the
assessments raised by the commissioner.
He blamed the high rate of unresolved
applications to inefficient and ineffective tax audit and Technical
Units. His inquiries with management discovered inadequate number of
staff and lack of skilled and experienced staff to handle ever rising
tax objection cases filed by taxpayers.
In addition, he also noted admission of tax objections applications without collecting the deposits amounting to about 14bn/-.
“This is contrary to Section 51(5) of
the Tax Administration Act, 2015 that requires the Commissioner, before
entertaining any objection case, the taxpayer should deposit an amount
of one-third of tax assessed or amount of tax not in dispute whichever
is greater,” the CAG observed.
The practice, he said, attracts
dishonest objections and encourages non-compliance to tax laws from
taxpayers. He said further that such matter coupled with inefficient
objection system clearly tied up significant government revenue in tax
objections countrywide.
“As consequence, the revenue targets are
not attained and hence the implementation of government plans is
negatively affected,” the CAG said in his report presented before the
National Assembly in Dodoma last week.
Professor Assad stated that in his
review on how the rejected and settled tax objections were handled, he
observed that tax objection applications with over 15bn/- from seven tax
regions were rejected by the Tanzania Revenue Authority Commissioner
General.
The reason behind, he said, was due to
lack of proper grounds of objection contrary to Section 51(1) of the Tax
Administration Act, 2015. He pointed out that objection cases with
total assessed tax liability of 1,378,200,249/- were settled.
“Contrary to Tax Administration Act
2015, the outstanding taxes totaling 16,461,531,975/- were not collected
by the authority by the time of my audit. Failure to collect and
enforce taxes on objections signals that the Tax Objection and
Enforcement Mechanisms are not efficient and effective,” he said.
The CAG has recommended proper handling of tax objection applications to resolve the overdue unresolved tax objections.
He proposed increased number of
competent and experienced personnel, enhancement of technical capacity
of personnel in the Technical Services Unit and strengthening of the tax
assessment process to reduce the number of objection cases.
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