Q&A – 3 June 2024

Legality of agency notices by TRA

I am a medium sized trader paying my taxes regularly and on time. However, a few weeks ago I was served with a demand notice for taxes that I believe I do not owe, and a few days later my account was frozen vide an agency notice. I was told I had no recourse to Courts and that the money would be debited automatically from my account, which was ultimately done, paralysing my operations. I have followed up to understand how the liability accrued, only to realise that it is an old invoice which I had cancelled and reissued with the right amount of items I had delivered. How can a cancelled invoice give rise to a tax liability? How can TRA just take my money without giving me the right to be heard? Why can Courts not issue injunctions? This has become market practice and all businesses are suffering. What can be done?
MH, Dar

If you will recall, before April 2021 the TRA had been using agency notices to debit taxpayers accounts even when the taxpayer was fighting her/his dispute in the tax Court system. Agency notices were issued on the ground that an appeal is not an automatic bar to execution and that the TRA does not need execution orders from the Courts for purposes of recovering tax. This led to taxpayers avoiding holding large sums of funds in their bank accounts. The agency notices triggered hundreds of applications for stay of execution being filed in an already overloaded tax Court system, which further slowed down disposition of tax cases on their actual merits. However, since under our law, Courts can normally grant stay orders only when there is a threatened execution, by the time a taxpayer received an agency notice which triggered the execution and then filed a stay application, the banks had already transferred the funds, making the application nugatory and overtaken by events.

After changes made at the beginning of the second quarter of 2021 by Her Excellency President Samia Suluhu Hassan, the TRA almost immediately stopped issuing such agency notices. This decision was welcomed by the business community and paved the way to restore some investors’ confidence. However, the law that allows such agency notices to be issued remained intact, and was a concern addressed in the FB Attorneys 2021 end of year legal update.

What has now resurfaced is the (re)issuance of demand notices, followed by agency notices. The good news is that if your dispute is in the tax Courts already, you can apply for a stay of execution under certificate of urgency. The tax Courts have been entertaining this and many such orders have been issued, rightly so, in favour of the taxpayer. That does not address your question though.

The biggest issue of all, is when the demand notices and agency notices are issued without issuance of assessments, in your case on a cancelled invoice, wherein you can neither effectively object, nor rush to Court to get any orders to stop the banks from debiting your account, based on a decision by the Court of Appeal, which hasn’t yet been challenged. This is certainly very concerning as our Constitution clearly provides that the Judiciary shall be the authority with final decision in dispensation of justice in Tanzania, and that every person is entitled to a fair hearing and a right to appeal. At the moment, and in our opinion, these demand notices and agency notices are not allowing taxpayers the right to a fair hearing, the right to be heard and the right to appeal amongst others. In short, one can argue that the taxpayer is being condemned unheard.

It is true that there are many people avoiding paying their taxes, and the TRA needs to clamp down on such persons. However not every taxpayer can be pooled into this category, and taxpayers cannot be condemned unheard. It is also going to have a ripple medium to long term effect on the economy, especially with inward investment into Tanzania, if this system is not immediately unbiasedly addressed. It will also affect the banking sector and the money supply.

The solution. The easiest is for there to be quick and easy changes to the Tax Administration Act in the coming Finance Bill allowing taxpayers to explicitly challenge such demand notices and agency notices, failure of which the practice will continue. It is for the business community to pursue this with their associations and organizations to be effectively heard. However, taxpayers can also consider challenging the constitutionality of such an approach by the TRA, and leave it on the Courts to decide whether this practice is constitutional or not.

Having said that, it must be reiterated that taxpayers must support the socio-economic development of our country by paying their taxes fairly and timely, and there are still many traders and businessmen who remain uncompliant. However, and as stated before, that does not mean that the taxpayer should be denied a right to be heard.

Parental responsibility after adoption

I am an adopted child and my adoptive parents have maintained a close relationship with my biological parents. Some people say I have been blessed with two sets of parents. They each take care of my needs and share responsibility for my education. What does the law say about parental responsibility after adoption? Please guide me.
RF, Morogoro

It is good to hear that you have people who care for you. The Law of the Child Act [Cap. 12 R.E 2019] (the Act) governs matters of adoption in Mainland Tanzania. According to section 64 of the Act, when an adoption order is made (a) the rights, duties, obligations and liabilities including those under customary law of the parents of the child or any other person connected with the child of any nature whatsoever shall cease; and (b) the adoptive parent of the child shall assume the parental rights, duties, obligations and liabilities of the child with respect to custody, maintenance and education as if the child was born to the adoptive parent in a lawful wedlock and was not the child of any other person.

Therefore, the adoption essentially shifts parental rights and responsibilities from the biological parents to the adoptive parents. The law does not recognise the arrangement of sharing responsibility between adoptive parents and biological parents.