Q&A – 8 June 2020

Confusion on what to do after rejection of waiver

The TRA has raised a huge assessment on our oil and gas company which is at an exploration stage and has no revenues whatsoever. We have applied for a waiver and also objected to the assessment. Our waiver application has been rejected by the TRA and our consultant is unfortunately confused what to do. Can you please guide?
TK, Dar

There is indeed some confusion because of a very controversial interpretation of the law by the Court of Appeal, a recent Tribunal decision and inconsistent position that the TRA have been taking. Not only is this uncertainty frustrating for taxpayers and likely for the taxman, but it is also delaying resolution of tax disputes on merit. We explain below.

Section 50(1) of the Tax Administration Act seems to imply that a tax decision includes an assessment or other decision or omission on a matter left to the discretion, judgement, direction, opinion, approval, consent, satisfaction or determination of the Commissioner General under a tax law that directly affects a person. Hence it would seem that the interpretation of tax decisions is not only that of an assessment but widely interprets other decisions and omissions.

Based on a tax decision, under section 51(1) a taxpayer is allowed to file an objection to the Commissioner General in addition to seeking for a waiver if required. Thereafter, under section 52(5), after following certain laid out procedures, the Commissioner General is required to issue a final determination of the objection, what we interpret to culminate into an objection decision.

Then, under section 53(1), an objection decision or other decision or omission of the Commissioner General under this part is appealable to the Tax Revenue Appeals Board (Board). This would imply that it is not only an objection decision that can be appealed to but any other decision or omission. The Court and Tribunal have however stated that only objection decisions are appealable to the Board.

The question that begs an answer, is what a 1/3 waiver decision is. It has been held that it is not an objection decision and therefore you cannot appeal to the Board. What has been said by the Tribunal recently is that if you are denied a 1/3 waiver, you once again, file another objection to the Commissioner General. An objection on an objection. As we explain further below, not only does this lead to absurdity in interpretation of the tax statute but loads the Commissioner General with one objection after another. Further, one of the prerequisites to admitting an objection under section 51(5) is if the taxpayer pays the amount of tax which is not in dispute or one third of the assessed tax whichever amount is greater. Now in the case of a second objection on the 1/3 waiver decision, how does one comply with this section 51(5)? Complying with it becomes an impossibility and one wonders how such an objection can even get admitted and determined.

What we believe should be the correct interpretation is that an objection decision can emanate from a tax decision which is arrived at after an objection is filed against an assessment.

You will note that in addition to objection decisions, section 53(1) clearly provides for other decisions and omissions to be appealed to the Board. What are these other decisions and omissions is what the Courts need to address themselves on, and also address on why there is such a provision provided under the tax statute.

Moreover, the Tribunal has held that the jurisdiction of the Board as per section 16 of the Tax Revenue Appeals Act (TRAA) only allows the Board to admit appeals that are based on an objection decision of the Commissioner General made under the Tax Administration Act. What is being implied here is that any tax decision by the TRA must first be objected to the TRA, and only after getting such an objection decision, can one appeal to the Board.

However, what has not been adequately addressed is the provision of section 7 of the TRAA that is the specific provision that grants jurisdiction to the Board.

When section 50(1) is read with section 53(1) of the Tax Administration Act, there is a ‘drafting contradiction’ and clear absurdity that results, on what is appealable and what is not.

The Court of Appeal, in a recently filed review, will have a chance to relook at its decision, and it is to be seen what position the TRA will take in Court, and what the Court’s final position will be. Remember that whatever the Court decides, will not increase or decrease a taxpayer’s tax liability, but will rather provide guidance on what taxpayer’s like yourselves who have 1/3 waiver rejections should finally do. It also does not increase or decrease the collections of taxes. If at all, it will streamline and increase the early resolution of tax matters should the Court clean up the contradiction and absurdity that results therefrom.

Coming to what you should do! The fact that you are in exploration stage does not mean that no taxes are payable. There is potentially VAT in addition to SDL, PAYE, withholding tax amongst other taxes that remain payable.

On the 1/3 waiver rejection, at the moment most taxpayers are filing objections to this decision. TRAs position is not entirely clear or consistent. If you file an objection, we have seen TRA state that you should have appealed. If you file an appeal, there are preliminary objections raised that the Board has no jurisdiction! However, the Tribunal has recently sealed this and stated that the 1/3 waiver rejections must be objected to first.

Hence, for now, subject to the advice from your consultants, you should object against the 1/3 waiver decision (to get an objection decision) before you can appeal that decision.