Q&A – 2 June 2014

TRA denies tax exemption

We are a foreign investor and were given many exemptions by our sector ministry so that we could proceed with the project. There is a lot of outcry on exemptions but it seems people fail to understand that Tanzania is one of the dozens of countries trying to attract investors, and hence serious investors need incentives. The misuse of exemption is by non-serious investors who have tailored their entire business model on exemptions and tax evasion. In any case, TRA has refused recognising our incentives saying that they are not legal. The recent newspaper articles that the Government is going to abolish all incentives is also causing us concerns. Please guide what options we have.
RL, Dar

There are a number of issues you have raised above. You seem to have entered into an agreement with a certain Ministry. Unfortunately you did not mention the Ministry, but if it is a Ministry other than the Ministry of Finance, then chances are that whilst you have an agreement in place that grants incentives, these incentives have not been formalised by the Ministry of Finance so that TRA can give such incentives recognition. Much as you blame TRA, TRA is merely the implementing body and does not grant incentives. We believe that you need to contact your sector Ministry, who will likely contact the Ministry of Finance to formalise the incentives so that you can enjoy them.

Should your sector Ministry not be able to formalise these, or the Ministry of Finance which is part of the same government as your sector Ministry not agree to granting of such incentives, then you can proceed under the dispute resolution clause of your agreement. It is indeed unfortunate that the sector Ministry, Ministry of Finance and TRA are not synchronized to enable you automatically enjoy the incentives. This has indeed led to huge complaints about Tanzania’s investment climate, which on paper looks very attractive, but in practice has caused nightmares to many.

On abolition of incentives, we are not sure what article you are referring. However abolition of incentives can only be done by the legislation that allow such incentives to be granted. There cannot be a “wholesale” cancellation of incentives as it would be detrimental to the investor. We believe that incentives that will be abolished but which were granted through agreements that the government entered into, must be honoured depending on the wording of the agreement. Many agreements have fiscal and tax stabilization clauses which would mean that you could sue the government for compensation for the loss such removal of incentives will have caused you.

You must remember that the law does not freeze because of agreements. What we mean is that the law on incentives can be changed, and you will end up paying; however the agreements you have entered into, depending on the wording, are valid and hence allow you to sue the government for compensation of the loss that the removal of damages will have caused you. Should incentives be abolished without paying thought to this, the compensation that the government will pay will likely outweigh the additional tax collected by abolition of incentives. There are many cases in a number of other neighbouring countries where the impact on the government has been to its own detriment and surely Tanzanian authorities will pay attention to this.

Your tax consultant and lawyers can guide you further.

Doctor allows adultery

My doctor says that I have a weak heart and for me to improve my health (especially my heart), I need to engage in intercourse with other woman, although I am in a monogamous relationship. The doctor says this is so that my life span increases. Is my right to intercourse with other woman that will lead to better health not protected under our constitution? I am told that the Law of Marriage Act disallows adultery but how can the law of marriage act prevail over the constitution of this country? Are there no exceptions to adultery?
EB, Dar

You seem to imply that your doctor has allowed you to have intercourse with other woman so that you remain healthy. We are really concerned about the type of doctor you have visited and might want to get a second opinion. Although we are not doctors, this is the first time we are hearing that intercourse outside your marriage will improve your heart (and health). In fact from the little we know about the heart, we are sure that with too much strenuous intercourse outside marriage, you might end up getting a heart attack.

The constitution does not talk about intercourse the way you have mentioned. Since you agreed on your own accord to a monogamous relationship, you cannot at this juncture come back with this “new medicine” of having intercourse outside your marriage. Your constitutional rights are protected, and prevail over all the other laws of Tanzania, but your interpretation is wrong both in law and in fact.

We are quite sure your wife will also not accept such a prescription, the same way that you would not accept this type of recommendation from the doctor to your wife. We strongly recommend you get a second opinion and also meet a marriage counsellor. There is something seriously wrong somewhere.

And yes finally, if you decide to go the doctor’s route, your wife will have all the rights to divorce you.