Q&A – 12 December 2016

Witness appearance in tax Court

If I am summoned to appear as a witness before the Tax Revenue Appeals Board in a case am I not entitled to be remunerated for opening my mouth whilst at the Board? Why should I appear for free? Am I forced to appear?
OI, Mwanza

The Tax Revenue Appeals Board has a special provision for this and states in section 23 that (1) The Board or the Tribunal may call any person to attend at a hearing and give evidence including the production of any document if the Board or the Tribunal believes such evidence will assist in its deliberations. (2) A person summoned to attend and give evidence to the Board or the Tribunal shall be paid allowances and expenses at the rates specified by the Board or the Tribunal.

The section above clearly indicates that you are mandatorily entitled to allowances and expenses, but at the rates specified by the Board. To the best of our knowledge such rates have not been published but that does not mean you should not get compensated. As to whether you are forced to appear or not, once your remuneration issue is resolved, we believe it is mandatory for you to appear.

Tax avoidance versus tax evasion

Is it right to say that tax avoidance is legal whereas tax evasion is not?
UJ, Dar

Tax avoidance is the legitimate minimizing of taxes using methods approved by TRA under our statutes. For example businesses may avoid paying larger taxes by taking all legitimate deductions and by sheltering income from taxes by setting up employee retirement plans and other means, all legal which are provided for under out tax statutes. Tax evasion, on the other hand, is the illegal practice of not paying taxes, by not reporting income, reporting expenses not legally allowed, or by not paying taxes owed to mention a few. Tax evasion is also a criminal offence and is usually punishable by imprisonment, a fine or both.

At times there is a very thin line between tax avoidance and tax evasion and it is paramount that your tax consultant guides you on this. In fact section 35 of the Income Tax Act specifically provides that (1) Notwithstanding anything in this Act, where the Commissioner is of the opinion that an arrangement is a tax avoidance arrangement, he may by notice in writing make such adjustments as regards a person’s or persons’ liability to tax (or lack thereof) as the Commissioner thinks appropriate to counteract any avoidance or reduction of liability to tax that might result if the adjustments were not made. You can see that the commissioner can unwind what he believes is a tax avoidance scheme that he believes is disallowed under our tax statutes.

All said and done, we must admit that there is a grey area in Tanzania on what amounts to tax avoidance.

Telling your criminal lawyer the truth

I am charged with a criminal offence and am wondering whether I should tell my lawyer the truth? What if the lawyer refuses to defend me after hearing me? What are the lawyer’s duties to me as his client?
PL, Dar

There is what you call an Attorney Client privilege whereby your lawyer cannot disclose any information relating to an offence you have committed. It may not fully apply to an offence you are about to commit. Whilst lawyers might be employed by you, they are still officers of the Court, and therefore cannot lie or misguide the Court. Hence if your lawyer knows you are guilty of an offence, the first thing he must do is tell you to plead guilty to that offence, unless there are factors that your lawyer can legally use to mitigate the offence or its consequences. For example if your lawyer lies in Court, he can be held for perjury ie knowing falsity, and may face imprisonment or be barred from practicing law.

Your lawyer can attack the prosecution’s evidence and can come up with arguments that may be less than rock solid, so long as they are reasonably supported by the evidence. The lawyer cannot offer your testimony knowing it to be false and you will see in many trials the accused does not testify, which however does not create a good impression on the presiding judge.

You must appreciate that every attorney is going to be different in what he/she wants to know, and things will vary based on the specific case, Court, and gravity of the charges. As a general rule, you should never lie to your attorney as this will ultimately backfire.

Lastly, after hearing the truth, the lawyer has a right to discontinue to represent you. He however cannot testify against you in Court.

Imprisoning a company

Our company has been charged with a certain offence which is punishable by imprisonment. How can a company be imprisoned?
TU, Dar

We are unsure what statute you are talking about but as some statutes specifically provide for the directors or senior officers to be imprisoned. However if there is no such explicitly provision, then the Interpretation of Laws Act has the answer.

Section 71(3) states that except where otherwise expressly provided, where the penalty prescribed in a written law in respect of an offence does not consist of or include a fine, the Court before which the offence is tried may, in the case of a body corporate, impose a fine– (a) where a term of imprisonment not exceeding six months is prescribed, a fine of two million shillings; (b) where a term of imprisonment exceeding six months but not exceeding one year is prescribed, a fine of three million shillings; (c) where a term of imprisonment exceeding one year but not exceeding two years is prescribed, a fine of five million shillings; (d) where a term of imprisonment exceeding three years is prescribed, a fine of ten million shillings.

Hence in the absence of anything contrary in the law under which you are charged, the imprisonment of a body corporate is to be substituted with a fine as above.