Q&A – 26 October 2015
Liability of managers in tax law
I am CEO of a large company and am of the opinion that my company cannot, and will not, meet its tax obligations. Infact, although there is a tax manager in place, I am worried that the company is not tax compliant. I am only an expatriate so fully protected but is there something I should be aware of?
OP, Dar
Under the old tax regimes there was confusion in different tax laws as to the personal liability of managers like yourselves. However with the new Tax Administration Act 2015 in place, there is no more any ambiguity.
Section 65 of this newly enacted law states that where an entity fails to pay tax on time, a manager of a person who was the manager of that entity within a period of twelve months prior to the entity default shall be jointly and severally liable with the entity for the payment of tax.
The law however states that such liability on managers shall not apply where the manager has exercised the degree of care, diligence, and skill to prevent failure of tax.
You can see that you will be personally liable to the tax authority for payment of such taxes. The Act allows you then to hold any asset of the company to the amount not exceeding the amount you will have paid on behalf of the company.
Being an expatriate does not mean you have extra protection as the Tax Administration Act does not distinguish managers who are local and those who are expatriates. Infact, the Act allows the Commissioner General to order the Director of Immigration Services to stop you from leaving the country for a period of 14 days after which the Commissioner General must have a Court order in place to restrain you from leaving.
It is important you contact your tax consultants and auditors to discuss how your company can become tax compliant.
Company secretary confusion
Our company always appoints a person from the legal department as a company secretary. In the last 12 months, we have lost all our legal
team members and are finding it tedious having to change company secretaries all the time. What options do we have? How can we bind the employees as we do not wish to change company secretaries whenever they leave us?
RO, Mwanza
Your employee is an employee and not your spouse. You cannot bind an employee not to leave your organisation.
All you can do is have a notice period that the person must provide before leaving.
The permanent solution is to appoint a company that specialises in such secretarial work to act as your company secretary.
That will get rid of your problems as it will not be an individual. The Companies Act also allows such appointment of a company to act as secretary.
Pornographic material on e mail
We have some managers in our office who forward very obnoxious and pornographic material on e mail. It is against company policy but they use their private e mails to forward these. I have also started receiving these ridiculous e mails. Is this not an offence?
EE, Moshi
Apart from other penal statutes that address pornography, the recently enacted Cyber Crimes Act provides under section 14 that (1) a person shall not publish or cause to be published through a computer system or through any other information and communication technology: (a) pornography; or (b) pornography which is lascivious or obscene. (2) A person who contravenes subsection (1) commits an offence and is liable on conviction, in the case of publication of- (a) pornography, to a fine of not less than twenty million shillings or to imprisonment for a term of not less than seven years or to both; and (b) pornography which is lascivious or obscene, to a fine of not less than thirty million shillings or to imprisonment for a term of not less than ten years or to both.
Section 23 of the same Act further adds that (1) a person shall not initiate or send any electronic communication using a computer system to another person with intent to coerce, intimidate, harass or cause emotional distress.
(2) A person who contravenes subsection (1) commits an offence and is liable on conviction to a fine of not less than five million shillings or to imprisonment for a term of not less than three years or to both.
It does not matter whether these employees are the originators of the pornographic and other e mails or not.
Simply forwarding such material is an offence and one that can attract both a fine and imprisonment. We suggest you inform them of the above and if the e mails and behavior does not stop, report them to the police who can take appropriate action.
They must be reminded that pornography in Tanzania is prohibited.
Banks and corruption offences
I work for a bank and one of our borrowers is being charged with corruption. Can his assets be attached even before it is proved that he is guilty? What if we have an encumbrance on one of his key assets against which we lent him large amounts of money?
YE, Dar
The Prevention and Combating of Corruption Act does allow attachment of the accused’s money and other property when such a person is charged with corruption or related offences.
However it is for the Director of Public Prosecution (DPP) to apply for such an order. The DPP can also make an application that such assets not be transferred, pledged or otherwise disposed off.
This Act has taken into account any encumbrances created in good faith prior to such an application and the Court may order the sale, transfer or disposal of any property by the accused where the court is satisfied that such sale, transfer or disposal is necessary in order to safeguard the property rights of any other person claiming interest in the property.
We therefore believe the bank is adequately protected so long as the encumbrance was created prior to the charge, and the bank is not party to this mischief, if any.